Nvidia Stock Rises 2% Ahead of Earnings as Options Market Expects Limited Volatility

TradingKey - Nvidia (NVDA) is set to report its latest quarterly results after the US market close on Wednesday. Following seven consecutive trading days of losses, Nvidia rebounded 2.19% on Tuesday and rose another 0.33% in pre-market trading on Wednesday, indicating that some investors are beginning to re-enter the market ahead of the earnings release.

Source: TradingView

However, volatility expectations from the options market are noticeably subdued this time. ORATS data shows that post-earnings implied volatility for Nvidia is around 5.4%, the lowest level since August 2021. In other words, while traders remain focused on the report, they are not betting on dramatic surges or plunges in the stock price as they did in the past.

Source: ORATS

The cautious options pricing is primarily linked to Nvidia's actual performance following its past several earnings releases. Matt Amberson, founder of ORATS, pointed out that in the last eight earnings announcements, Nvidia's actual price moves were smaller than what the options market had priced in advance. This means buyers of call or put options paid a premium for earnings risk, but the ultimate stock price moves fell short of expectations.

As this pattern recurred, traders began dialing back pre-earnings volatility premiums. The market no longer defaults to expecting double-digit percentage swings with every Nvidia earnings release; instead, it leans toward the view that even if financial metrics continue to grow, the stock price reaction may remain within a relatively limited range.

Although the options market expects smaller post-earnings volatility this time, Nvidia's importance to the broader AI sector remains undiminished. Larry Adam, Chief Investment Officer at Raymond James, stated that Nvidia's results and guidance remain an important window into AI industry trends. The company's assessment of chip demand, customer capital expenditures, and future orders could influence the overall performance of semiconductor stocks and even broader US tech shares.

According to FactSet data, Wall Street expects Nvidia's second-quarter revenue to reach approximately $92.3 billion, with adjusted earnings per share of $2.09, while data center revenue is projected to grow about 110% year-over-year to $86.3 billion. Meanwhile, the market expects third-quarter revenue to reach $104.2 billion, with adjusted earnings per share of $2.37.