Earnings
Tuesday, November 19th 2024
Nvidia Earnings: Options Market Expectations vs. Reality
Nvidia Earnings: Will This Quarter Deliver Another Big Surprise for Shareholders?
Summary
As Nvidia prepares for its earnings report on November 20th, the options market indicates heightened expectations, with an implied move of 7.9%, reflecting increased trader anticipation. Historically, Nvidia's earnings have often fallen short of market expectations, but when they exceed them, the stock price typically surges. The current options pricing suggests a potential high-impact event, especially given Nvidia's significant role in sectors like AI and gaming. Traders are cautious due to past trends but remain hopeful for another positive surprise that could influence broader market sentiment.
As Nvidia Corporation gears up for its earnings report after the close on November 20th, all eyes are on the options market to gauge expectations for one of the most closely watched stocks in the tech sector. Historically, Nvidia’s earnings moves have often undershot what the options market anticipated. However, when the company does deliver a larger-than-expected move, it has consistently been good news for shareholders, providing a lucrative reward for bullish investors.
“Of the last twelve quarterly earnings, five earnings moves have been outside what the market expected. Of those, all have been up moves for the stock price,” said ORATS Principal Matt Amberson.
This quarter, Nvidia’s options pricing is reflecting heightened anticipation. With the stock price up 2.8% today to $144, the implied move currently sits at 7.9%. This is down from 8.6% at the open today, up from 8.3% earlier this week and an average of 7.9% last week. This marks a noticeable increase in traders’ expectations as the earnings date approaches, with the implied move exceeding Nvidia’s historical implied average of 8.0%. Interestingly, this figure also aligns closely with the stock’s historical actual move of 8.4%, suggesting that the market is pricing in a potential high-impact event.
Nvidia’s track record of underwhelming relative to implied moves is a reminder of the challenges of predicting earnings reactions. Yet, the exceptions to this pattern are where the opportunities lie. In five of the last twelve quarters, Nvidia’s actual post-earnings price movement exceeded what the market had priced in. In every one of these cases, the stock saw a significant upward surge, reinforcing the stock’s potential to reward investors who anticipate positive surprises.
These outsized moves typically coincide with moments of significant market re-evaluation, often tied to Nvidia’s dominance in sectors like artificial intelligence, gaming, and data centers. As Nvidia continues positioning itself as a leader in the AI revolution, traders may see this earnings report as a key indicator of how well the company can meet growing expectations and maintain its growth trajectory.
Nvidia’s outsized influence on broader tech sentiment also amplifies the stakes of this earnings report. The stage is set for significant market activity, with options traders pricing in a larger-than-average move. As Reuters recently highlighted, Nvidia’s options are “primed for a $300 billion price swing,” a testament to the weight the company carries in the technology sector and the broader market.
For traders, Nvidia’s historical tendency to undershoot implied moves may suggest caution, but the record of upward surprises in high-impact quarters cannot be ignored. The current pricing of options reflects a growing sense of anticipation that this quarter could deliver another defining moment for the company—and the market.
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