By Saqib Iqbal Ahmed
NEW YORK (Reuters) – Traders in the U.S. equity options market are expecting Nvidia’s ( NVDA ) upcoming earnings report to swing more than $300 billion in shares of the world’s most dominant artificial intelligence chipmaker.
Options pricing showed traders expected a move of about 9.8% in the company’s shares on Thursday, a day after the earnings report, data from analyst firm ORATS showed. According to ORATS, that’s a bigger-than-expected move than any Nvidia report in the last three years and the stock’s average post-earnings move over the same period is more than 8.1%.
With Nvidia’s market capitalization at about $3.11 trillion, a 9.8% swing in shares would translate to about $305 billion, 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 stocks, including Netflix and Merck, according to LSEG data.
Nvidia’s results, whose chips are widely seen as the gold standard in artificial intelligence, have big implications for the broader market as well. Shares are up about 150% year-to-date, accounting for a quarter of the S&P 500’s 18% year-to-date gain.
“It was the single largest contributor to the S&P 500’s overall gains,” said Steve Sosnick, chief strategist at Interactive Brokers. “It’s positioning the Atlas market.”
Options pricing suggests that traders are more concerned about missing a big upside move from Nvidia than getting hurt by a big drop.
According to a Susquehanna Financial analysis of options data, traders give the stock a 7% chance of a more than 20% rise by Friday, while a 4% probability of a selloff of more than 20%.
“(Ahead of earnings) people generally 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 traders are pricing in this big for Nvidia has to do with how volatile the company’s stock has been in the past.
This year Nvidia’s average 30-day historical volatility — a measure of how much the stock has moved over a 30-day period — was more than double the same measure for all other companies with a market cap greater than $1 trillion. Reuters analysis of trade warning data.
“Options really reflect how the stock is moving,” said Christopher Jacobson, a strategist at Susquehanna Financial Group who makes markets in Nvidia’s securities.
“(It’s) a function of continued uncertainty/belief around AI and the eventual size of the opportunity combined with NVDA becoming a widely followed stock in both institutional and retail,” he said.
(Reporting by Saqib Iqbal Ahmed; Editing by Ira Iospashvili and Jonathan Otis)
