As Nvidia (NVDA) gears up to announce its second-quarter results on August 28, traders are flocking to the company’s shares and options. According to a Wall Street Journal report, this surge in activity has made Nvidia contracts some of the most actively traded contracts in the U.S.-listed options market in recent days. Some of these traders are making bold bets on a significant stock movement after the company’s results.
Traders Bet Big on NVDA Options
In light of this, traders seem to be betting big, targeting trades that would pay off if Nvidia shares continue their upward trajectory. For instance, call options tied to the stock reaching $135 and $140 have been particularly popular in recent sessions. Call options give traders the right to buy Nvidia stock at a predetermined price (strike price) by a specific date (expiration date). Despite Nvidia’s shares dipping on Monday to close just below $126.50, those who invested earlier have likely seen substantial returns.
Moreover, data from the TipRanks Options tool shows that Nvidia call options with a strike price in the range of $121 to $126 with an expiration date of August 30 are currently in-the-money. This indicates that those who made earlier bets have seen significant gains.
Traders Brace for Volatility in NVDA Stock
As the earnings report approaches, traders are bracing for increased volatility. According to the TipRanks Options tool, traders are expecting a significant move following the earnings report. The tool calculates this anticipated movement based on the at-the-money straddle of the options closest to expiration. Essentially, an at-the-money straddle involves buying both a call option and a put option at the current stock price, allowing traders to profit from a big price move in either direction.
Currently, options traders are anticipating a sizeable 11.2% move in either direction, reflecting the strong expectation of significant volatility surrounding Nvidia’s upcoming earnings announcement.
Notably, this predicted volatility exceeds the average post-earnings move of around 9% over Nvidia’s last eight earnings releases. Given Nvidia’s significant weight within the S&P 500 (SPY) index, such a large swing could introduce turbulence in the broader market.
Is Nvidia a Buy, Sell, or Hold?
Analysts remain bullish about NVDA stock, with a Strong Buy consensus rating based on 33 Buys and three Holds. Over the past year, NVDA has skyrocketed by more than 100%, and the average NVDA price target of $149.89 implies an upside potential of 18.5% from current levels.
