Nvidia Earnings: Quarterly Results, Outlook, AI Chip Demand ...

Nvidia’s earnings have been a blockbuster event for investors in recent quarters, with the stock seeing dramatic moves and impacting risk sentiment as well as tech stocks more broadly. The options market suggests this time will be no different.

Options are a way for traders to take advantage of a stock’s move without purchasing the shares themselves, instead buying derivatives contracts that bet on a rise in prices to a certain level—a call option—or a fall in prices, which is a put option. If prices rise or fall close enough to the level of their contract—the strike price—then the trader has the right, but not the obligation, to buy or sell the stock at that price. Anyway, data on Nvidia options give an insight into where traders think the shares will go after earnings.

“Stand by for potential fireworks across markets in either direction,” Deutsche Bank strategist Jim Reid wrote in a note, eyeing the big moves implied by the contracts that have attracted the most traders.

Indeed, Nvidia stock is poised for volatility—one way or another—after its earnings, and the swings could have ripple effects across the S&P 500.

“The options market is pricing in a move of 11% in either direction for Nvidia shares today, which would inevitably leave a footprint on the entire stock market given the company's ballooning market cap,” Marios Hadjikyriacos, an analyst at broker XM, wrote in a note. “Nvidia has been carrying the stock market on its shoulders this year, so its quarterly earnings today could have repercussions beyond its own shares.”

FactSet data covering Nvidia’s options reveal a strong concentration of open interest—or the total amount of active contracts—10% or further from the stock’s closing price Tuesday of $694.52.

The single most popular call option across contracts expiring on Feb. 23, is for the stock price to hit $1,300, an apparent Hail Mary for an 87% gain, as there is much less interest for options either side of that level. Another bullish concentration of call options is around the $1,010 and $1,020 marks, which would be an almost 50% gain, though there remains a high open interest across options in the range between $730 and $750, implying a move of 5% to 15%. On the bearish side, the two most popular put options are for Nvidia stock to fall to $650 or $600, according to FactSet, which mark declines of 6% and 14%, respectively.

Implied moves based on options are worth taking with a grain of salt. While the options market can have an impact on stock prices, investors’ decision to buy or sell shares based on a given catalyst reigns supreme. But that shouldn’t stop investors from taking heed of what the options market is saying: This could be a bumpy day.