Nvidia crushes estimates again, but the alarm has been sounded?
Views 270K Contents 161
Earnings Volatility: Bullish Nvidia Bets Explode Ahead of Earnings
Stock prices may see larger-than-normal moves during earnings season, making it a potentially attractive time for options traders. For investors looking to trade against these moves, you should always keep track of how the options might shift after their earnings. Here are the top earnings and volatility for the week:
-Earnings Date: 11/20 After market close
-Implied Move: 7.4%
-Absolute Average Actual Move for the past 4 Quarters: 10.0%
-Absolute Average Actual Move for the past 12 Quarters: 6.6%
-Earnings Normalized Estimate: USD $3.02
-Revenue Estimate: USD 16.11 billion
According to recent data from Market Chameleon, options for Nvidia are undervalued with with its average actual move for the past 4 quarters, yet higher than its average actual move for the past 12 quarters. The options market overestimated NVDA stocks earnings move 67% of the time in the last 12 quarters. The predicted move after earnings announcement was ±7.0% on average vs an average of the actual earnings moves of 6.5% (in absolute terms).
Calls are outnumbering puts ~1.75:1, with the 2023 Nov 24 500 call leading the way (volume is 27,553). The option contract with the highest open interest was 2024 Feb 16 calls with 36,724.
For calendar year 2024, EPS expectations from some investors "have crept toward the mid-$20s, but we continue to model around $21.50," reiterating a buy rating and price target of $560 for the stock, UBS said.
"The key debate on the stock" remains 2025 "where investors are fearful of capacity digestion," UBS said. "We model EPS largely flat."
Don't Get Crushed by Earnings. Here are things you should know before considering a trade.
Knowing the IV Crush
Before significant corporate events such as earnings announcements, product launches, or clinical trial results, implied volatility tends to increase. However, after the news has been released, the implied volatility can drop significantly due to the sudden clarity in the market and the stock price reaction to the news. This phenomenon is referred to as IV crush.
IV Crush And Option Prices
IV crush can lead to a decrease in option prices because the Implied volatility is lowered dramatically. This decrease in option prices due to IV crush can be a risk for options traders who have purchased options at a higher price with the expectation of making a profit from a significant move in the underlying stock price. Conversely, IV crush may not be as prevalent if the option is undervalued and the stock price moves drastically, which can pose a risk for option sellers. It's important for traders to be aware of IV crush and factor it into their trading strategy when considering options trades around significant corporate events.
Not all options are affected equally by an IV crush. IV crush affects short-term option prices more than long-term option prices.
Nonetheless, it's important to note that trading options always involve risks, and investors should consult with a financial advisor before making any trades.
Source: Dow Jones, Market Chameleon, Bloomberg
Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request. Moomoo does not guarantee favorable investment outcomes. The past performance of a security or financial product does not guarantee future results or returns. Customers should consider their investment objectives and risks carefully before investing in options. Because of the importance of tax considerations to all options transactions, the customer considering options should consult their tax advisor as to how taxes affect the outcome of each options strategy.
The data and information provided has been obtained from sources considered to be reliable, but Moomoo Financial and its affiliates do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more