Nvidia results could spur record $300 billion swing in shares, options show
By Saqib Iqbal Ahmed
NEW YORK, Aug 27 (Reuters) -Traders in the U.S. equity options market are expecting Nvidia's NVDA.O upcoming earnings report to spark a more than $300 billion swing in the shares of the world's most dominant artificial intelligence chipmaker.
Options pricing shows that traders anticipate a move of around 9.8% in the company’s shares on Thursday, a day after it reports earnings, data from analytics firm ORATS showed. That's larger than the expected move ahead of any Nvidia report over the last three years and well above the stock's average post-earnings move of 8.1% over that same period, according to ORATS.
Given Nvidia's market capitalization of about $3.11 trillion, a 9.8% swing in the shares would translate to about $305 billion, likely the largest expected earnings move for any company in history, analysts said.
Such a move would dwarf the market capitalization of 95% of S&P 500 constituents, including Netflix NFLX.O and Merck MRK.N, according to LSEG data.
The results from Nvidia, whose chips are widely seen as the gold standard in artificial intelligence, also have big implications for the broader market. The stock is up some 150% year-to-date, accounting for around a quarter of the S&P 500’s 18% year-to-date gain.
"It alone has been a huge contributor to the overall profitability of the S&P 500," said Steve Sosnick, chief strategist at Interactive Brokers. "It's the Atlas holding up the market."
Options pricing suggests traders are more concerned about missing out on a large upside move from Nvidia than getting hurt by a large drop.
Traders are assigning a 7% chance the stock rises more than 20% by Friday, while only a giving a 4% probability to a more than 20% sell-off, according to a Susquehanna Financial analysis of options data.
"(Ahead of earnings) people typically want to buy hedges, they want to buy insurance, but in Nvidia's case, a lot of that insurance is FOMO insurance," Sosnick said, referring to the popular acronym for "fear of missing out."
"They don't want to miss a rally."
Part of the reason options traders are pricing this large a move for Nvidia has to do with how volatile the company's shares have been in the past.
Nvidia's average 30-day historical volatility this year - a measure of how much the stock has gyrated over a rolling 30-day period - is about twice the average of the same measure for all other companies with market caps higher than $1 trillion, according to a Reuters analysis of Trade Alert data.
"The options are just reflecting how the stock is actually moving," said Christopher Jacobson, a strategist at Susquehanna Financial Group, which makes markets in the securities of Nvidia.
"(It's) is just a function of continued uncertainty/optimism with regards to AI and the ultimate size of the opportunity coupled with NVDA having become such a widely followed stock among institutional and retail," he said.
GRAPHIC: Nvidia - Implied and actual earnings moves https://reut.rs/3T1HrwP
GRAPHIC: Trillion Dollar Club https://reut.rs/3yWpbOw
Reporting by Saqib Iqbal Ahmed; Editing by Ira Iosebashvili and Jonathan Oatis
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
