August 26, 2024 at 12:40PM EDTTo calculate what the odds makers are expecting following this week’s Nvidia Corp. earnings report, we can look at the pricing of an at-the-money straddle. Early Monday, NVDA is trading between US$129 and $130.The $129 calls are at 7.30 and $129 puts it at 6.90 or $14.20. This means that investors are expecting about an 11 per cent move in either direction this week. These options expire at 4:00 p.m. on Aug. 30.
For the November 2023 earnings, the stock ran up into earnings and the forward analyst price target was much higher. While beating earnings, the stock sold off for about two weeks post-earnings. In February 2024, the stock pulled back a little into earnings and rallied strongly for about two weeks post-earnings before retracing back to the earnings price gap over the following month.
If the stock gaps up 11 per cent to new highs it needs to run higher for a few weeks or a sharp correction is likely on a failed breakout. If the stock gaps down, there seems to be more risk on the downside back to the August lows with no clear support around the 11 per cent area.