Nvidia Options Traders Prepare for Significant Stock Movement Ahead of Earnings Report
Traders active in the U.S. equity options market are anticipating a significant move in the shares of Nvidia (NVDA.O), the leading artificial intelligence chipmaker, ahead of its upcoming earnings report.
Nvidia, which has surged approximately 50% so far this year, is expected to experience an 11% swing in either direction following the release of its quarterly results on Feb. 21, according to data provided by options analytics service ORATS. This projected movement is the largest anticipated shift that options traders have factored in before Nvidia’s earnings in the past three years, significantly surpassing the stock’s historical average earnings move of 6.7% during that period, as highlighted by ORATS founder Matt Amberson.
Given Nvidia’s substantial market capitalization of $1.8 trillion, such a move would potentially translate into a market value swing of approximately $200 billion. This would surpass the market capitalization of chipmaker Intel Corp (INTC.O) and exceed the combined market values of roughly 90% of S&P 500 constituents.
As of Thursday, trading activity in Nvidia options was notably high, with over 750,000 contracts exchanged by 1 p.m. (1800 GMT), making it the second most actively traded single stock in the options market.
Despite the significant appreciation in Nvidia’s stock price, demand for bullish options bets on the company remains robust. According to analysis from Susquehanna, a measure of sentiment known as the stock’s 90-day 25 delta call skew is currently near a five-year high. This elevated call skew suggests that investors continue to perceive substantial upside potential for Nvidia, even amidst its recent price gains, with a notable demand for upside exposure as some investors seek lower-risk strategies through upside calls.
Christopher Jacobson, a strategist at Susquehanna Financial Group, remarked, “The elevated call skew tells us that investors still see the potential for significant upside despite the move already made and that there is significant demand for upside exposure as some who may be fearful of the high volatility turn to upside calls for lower-risk exposure.”
Recently, on Wednesday, Nvidia surpassed Google-parent Alphabet (GOOGL.O) to become the third most valuable U.S. company by market capitalization.
Analysts anticipate Nvidia to report earnings of $4.56 per share, accompanied by a substantial increase in quarterly revenue to $20.378 billion from $6.05 billion a year ago, based on the mean estimate from 33 analysts, as per data from LSEG.
