As Nvidia approaches its second-quarter earnings report, options trading indicates a heightened expectation for volatility, with a projected 5.6% swing in the stock price, which is more than double the average post-earnings movement seen in the past year.
The trading activity shows a strong preference for bullish positions, with 226,000 open call contracts at the $220 strike compared to under 80,000 puts, indicating that traders are betting on a price increase.
Charlie Moon from Prosper Trading Academy noted that despite Nvidia's recent poor performance following earnings, there is a belief that this report could lead to a significant upward movement. Brent Kochuba from SpotGamma highlighted that if Nvidia's stock surpasses the $220 mark, it could trigger further buying from market makers, potentially pushing the stock towards $230.
Historically, Nvidia shares have declined after six of the last eight earnings reports, but current trading suggests that investors are willing to pay a premium for the chance of a substantial rally this time around