Welcome to Extreme Investor Network, where we provide unique insights and analysis on the latest trends in investing. Today, we are diving into the impact of Nvidia’s upcoming earnings report on the options market and how investors can capitalize on potential opportunities.
Nvidia has been a standout performer in Wall Street’s rally to record highs, but Goldman Sachs believes that the options market may be underestimating the impact of its earnings report. According to John Marshall of Goldman’s derivatives research team, options trades for the broader market are surprisingly cheap given the impending report from the chip giant. Despite the implied move for the stock being nearly 12%, the cost of straddles, which are a bet on market volatility, remains low.
The significance of Nvidia’s earnings report is evident in the options market, with Nvidia options volume accounting for 36% of all single stock options volumes over the past three months. This suggests that investors are expecting a major move in the stock following the earnings release.
With Nvidia now being the third largest stock in the S & P 500 index, the options market has also underpriced the potential impact on the broader market following previous Nvidia reports. This quarter’s report could be even more impactful, making it an opportune time for investors to consider short-term options plays on the S & P 500 to potentially capitalize on a Nvidia-sparked move.
Traders could consider buying call or put options on the index, or opt for straddles which combine both call and put options to capture value from a move in either direction. While straddles may be initially more expensive than directional options trades, the potential losses are limited to the upfront cost of the contract.
In conclusion, the options market may be underestimating the impact of Nvidia’s upcoming earnings report, presenting an opportunity for investors to strategically position themselves for potential market moves. Stay informed and stay ahead of the curve with Extreme Investor Network. Happy investing!