Nvidia's stock dropped over 6.5% from its recent highs, leading to a situation where a substantial portion of options contracts, particularly the popular 225 and 222.5-strike calls, are likely to expire worthless. On Monday, more than 15% of Nvidia options traded were set to expire the same day, with over 3 million contracts exchanged, totaling more than $1.3 billion in premium.
Notably, $1 billion of this was tied to call options, indicating a bullish outlook despite the stock's recent weakness. Traders are anticipating a 6.25% price swing based on implied volatility around the upcoming earnings report, which aligns with typical expectations but exceeds the average realized move of 3.2%.
Historically, Nvidia's stock has declined following earnings reports, which adds to the uncertainty for those holding call contracts. The current trading environment reflects a mix of optimism and caution as investors prepare for potential volatility