Nvidia Options Market Signals 8.32% Shares Move Post Earnings
by Jinta HONG, CFA
$NVIDIA (NVDA.US)$ plans to release earnings on May 28th after the market close. According to data from Earnings Analysis of moomoo, Nvidia may move 8.32% post earnings, which is close to the average expected volatility of 8.24% over the past 11 quarters.
Historically, Nvidia's stock price movement following earnings has often been less volatile than market expectations. When the movement exceeds market expectations, it tends to be an upward gains. In 5 out of the past 15 earnings, the company's stock price moved more after the earnings than implied by the options and all of these 5 earings resulted in price increases.
As of May 21, the put-to-call ratio based on options trading volume was 0.58, while the ratio based on open interest stood at 0.94. The last trading session saw a total of 3.28 million contracts traded, with 2.07 million calls and 1.2 million puts changing hands.
We've observed a decreasing trend in options volume recently compared to the period preceding the previous earnings report. Currently, the Implied Volatility (IV) is at 56.23%, with an IV rank of 33 and an IV percentile of 54%. This IV level is relatively low compared to pre-earnings periods in previous quarters, which was typically above 60%.
Fundamental Analysis
Short-Term: H20 Ban & Inventory Write-Down
Nvidia will take $5.5 billion inventory write-downs due to the H20 chip ban, which is GPUs exported to China. Well Fargos estimates the company is expected to report lower gross margins at 58% (while street consensus is more positive of 68%) and lower revenue (revised to $42.9B vs. prior $44B+ expectations) due to this write-down.
Mid-Term: Blackwell Ramp & Middle East AI Demand
Despite short-term pressures, the mid-term outlook appears more promising, with the ramp-up of Blackwell chip shipments. It is anticipated that the order of Blackwell chips will reach 3.6 million units in 2025 from major 4 cloud service providers, significantly surpassing the 1.3 million units shipped for Hopper in 2024. This increase in Blackwell shipments is expected to drive revenue growth in the upcoming quarters. Additionally, demand from the Middle Eastern market will provide further support, especially as UAE and United States signed a deal to build the largest artificial intelligence campus outside the states.
Long-Term: Solid AI Demand
From a long-term perspective, the demand for AI will continue to support NVIDIA's growth. The leading four cloud service providers have planned CapEX exceeding $318 billion for this year, marking a 19% increase YTD, with no indications of deceleration despite tariffs and broader economic challenges. Recent earnings calls from $Amazon (AMZN.US)$ , $Microsoft (MSFT.US)$ , $Alphabet-C (GOOG.US)$ , and $Meta Platforms (META.US)$ highlighted the pressing need to enhance AI infrastructure, driven by limited capacity, increasing inference workloads, and long-term commitments to GPUs and systems, according to Bloomberg Intelligence. This expansion will drive demand for GPUs and enhance NVIDIA's competitive position.
Option Trade Idea
Currently, options are relatively inexpensive, making it favorable for option buyers. The IV rank is at a relatively low level, which suggests that shorting volatility could be risky at this point. Typically, IV tends to decrease after earnings, but given the current low IV, there might be limited room for further decline. Instead, there could be an opportunity to go long on volatility. However, historical data indicates that stock price movements are often less volatile than expected post-earnings. This makes long the volatility seem unappealing as well.
Given the current relatively inexpensive options pricing, coupled with solid company fundamentals, option traders might consider buying in-the-money or slightly out-of-the-money call options, which could capitalize on both the potential for upside surprises and any increase in implied volatility leading up to the earnings. If volatility expansion toward historical pre-earnings level (~60% IV), it could amplify returns.
Disclaimer: Options trading entails significant risk and is not appropriate for all customers. It is important that investors read Characteristics and Risks of Standardized Optionsbefore engaging in any options trading strategies. Opening new options positions close to or on their expiration date comes with substantial risk of losses for reasons that include potential volatility of the underlying security and limited time to expiration. 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 i potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request.
Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only.
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10baggerbamm : well we know what the past couple of quarters have produced. when nvda comes out with earnings for a brief wrinkle in time it goes up and then it tanks...
Ttowbin23 : fasten your seat belts . going to the bank with this !!!
104890482 : what is put to call means?
104890482 104890482 : can someone explain to me? thank you
105527136 : no idea
73643475 104890482 : The put-to-call ratio (PCR) is a market sentiment indicator that compares the volume of put options traded to call options traded. It's a gauge of whether investors are leaning towards bearish or bullish sentiment.
What it measures:
The ratio reflects the volume of put options (bets that prices will fall) versus call options (bets that prices will rise).
Trying2figureitout : Historically, it tanks up to 5% tgen goes up
103363418 : what means
ferlyeong : Keep it up
103575541 :
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