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All-or-Nothing? Can Nvidia's Earnings Salvage "AI Narrative" Again? What Options Market Tells us?

ImSteven joined discussion · Nov 16 21:50

Hello everyone, I'm Steven. Topic for today: Nvidia.

Undoubtedly, $NVIDIA (NVDA.US)$ ’s earnings report is one of the most awaited and anticipated event of the market. Scheduled to be released after the close this Wednesday, November 19, key questions for this time are two-fold: First, whether the company can sustain its extremely high growth trajectory; and Second, whether the “AI narrative” is fundamentally sound or has elements of a bubble.

In any case, both NVIDIA’s current share price and the Street’s consensus expectations are already very demanding. Whether the company can merely meet those expectations will itself be a major test.

1. Street Expectations: a Very High Bar

For NVIDIA’s fiscal 3Q26 (quarter ended late October), Wall Street has set the bar extremely high:

- Total revenue consensus: roughly $54.5–55.3bn, up about 55% YoY.

- Data center revenue consensus: about $48.9–49.5bn, up 52–61% YoY, accounting for close to 90% of total revenue.

- Adjusted (non-GAAP) EPS: roughly $1.23–1.26, up about 50% YoY.

2. Key Focus Areas for This Earnings Print

(1) Data Center Business and the Blackwell Ramp

In the previous quarter, NVIDIA guided fiscal 3Q revenue to USD 54bn ±2%, with GAAP and non-GAAP gross margins of approximately 73.3% and 73.5%, respectively.

Within that, investors will be laser-focused on the data center segment, with particular attention to:

- Whether the ramp-up of the Blackwell architecture (GB300 / Blackwell Ultra, etc.) is tracking ahead of expectations.

- Whether management provides longer-dated order visibility into 2026–2027.

- Whether hyperscalers (MSFT, GOOGL, AMZN, etc.) are signaling continued acceleration in AI capex, or starting to emphasize returns on investment and potential normalization.

If Jensen Huang sounds on the call very constructive on Blackwell’s capacity, production schedule, and delivery cadence—and simultaneously raises guidance for the coming quarters—this would likely be the single most powerful positive catalyst for the stock.

(2) The Debate on AI Demand Sustainability vs. “Bubble Risk”

The prevailing view on Wall Street is that AI server capex will continue to accelerate this year and next, with NVIDIA as the largest single beneficiary.

At the same time, skepticism is rising: “With AI investments burning so much capital, can customers actually earn it back? Are we inflating an AI bubble?” The recent sharp sell-off in many neo-cloud names ( $CoreWeave (CRWV.US)$, $NEBIUS (NBIS.US)$, $IREN Ltd (IREN.US)$, $Applied Digital (APLD.US)$) has also been interpreted as a sign that the market is questioning the return profile of AI spending.

Against this backdrop, investors will focus on the following during NVIDIA’s earnings and guidance:

- Management commentary on customer ROI – whether they can point to concrete, monetizable use cases, rather than just reiterating abstract compute demand.

- Order mix and structure – whether revenue is still predominantly driven by one-off hardware purchases, or whether there is a growing share of long-term contracts / software and subscription revenue.

- Qualitative color on the AI growth curve beyond 2027 – any updated view on how long this cycle can realistically run.

In short, the market already accepts that “today is great”; what this earnings print needs to address is “how long the good times can last.”

3. Options Strategy Considerations

Heading into this earnings release, NVIDIA’s options market has been relatively calm on the surface. The implied move embedded in options pricing is around 7%, broadly in line with the experience of recent quarters.

From a historical perspective, in the past 15 quarters, the actual post-earnings move has exceeded the pre-earnings implied move in only 4 instances. This relatively low hit rate suggests that it is statistically not very common for NVIDIA’s actual move to blow past the implied band.

All-or-Nothing? Can Nvidia's Earnings Salvage "AI Narrative" Again? What Options Market Tells us?

Current implied volatility sits around the 68th percentile of its recent distribution, indicating room for normalization lower after the event.

Looking at the pattern of the past eight quarters, post-earnings IV crush in NVIDIA has typically been in the 5–20 vol-point range, with an average of about 10 points. Given that pre-earnings IV is on the higher side this time, a volatility reset after the print looks quite likely.

(1) Short-Volatility Structures

Based on the above, investors may consider short-volatility structures that aim to monetize:

- A decline in IV after the event, and

- A relatively contained move in the underlying share price.

To hedge against the risk of a strong positive or negative surprise, strikes should be set with ample distance from spot. For example, using roughly 2x the expected move (EM)—i.e., around ±15% from spot—as short strike levels would be a basic and practical idea.

(2) Positioning and Skew in the Options Book

There are a few micro-structure details worth noting: For this week’s 0DTE options, open interest on both calls and puts is unusually concentrated at the $180 strike, on both sides.

For options expiring one month out, call open interest shows noticeable peaks around USD 200, 220, and 230, while put open interest is relatively sparse.

This positioning pattern suggests that speculative money is using short-dated, out-of-the-money calls to bet on a post-earnings upside breakout.

4. Crowded Trades Can Backfire? Historical Patterns

Overly crowded positioning often ends up producing self-defeating outcomes. Meanwhile post-earnings “double-kill” moves (both bulls and bears getting hurt) are not unusual in NVIDIA’s history.

One of the most memorable examples was last November’s FY2025 3Q earnings:

- The intraday high-low range was about 8%, with intraday high and low pierced through the pre-earnings EM band,

- Yet by the close, the stock had reverted back inside that expected move range, killing both bull and bear within a single day

A similar pattern appeared after the FY2025 4Q earnings in February this year:

- The stock gapped up around 3% at the open,

- Then reversed sharply to close down about 8%, with intraday volatility of ~11%

These are precisely the types of scenarios that long-volatility, long-gamma traders need to be wary of: even if intraday realized volatility is high, timing and execution risk can be severe, and closing prices may NOT reward simple long-straddle or long-strangle structures.

Putting it all together, for investors who (1) Do not have strong intraday trading capabilities, and (2) Prefer more defensive, carry-style return profiles, a delta-neutral, short-volatility approach on both sides (e.g., wide short strangles with conservative strikes) may be a relatively more prudent strategy into this particular earnings event.

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