Key Takeaways:
Traders are bracing for a significant price swing in Nvidia Corp. (NVDA) following its fiscal first-quarter earnings on May 20, with the options market pricing in a potential 8.8 percent move in either direction.
"The options market is flashing an ominous sign about Nvidia's looming earnings," according to Lawrence G. McMillan, president of McMillan Analysis. He noted that straddles on the chipmaker are "notoriously overpriced heading into earnings in recent quarters," reflecting heightened demand for volatility protection.
The implied move stands sharply above the stock's average realized post-earnings swing of 3.2 percent. Data from the Cboe LiveVol platform shows implied volatility at 53 percent, indicating traders are preparing for a move larger than the 5 percent jump seen last quarter. The stock has fallen after its last three quarterly reports, including a 5.5 percent drop in February.
Despite recent weakness that has seen some popular call contracts expire worthless, bullish sentiment persists. Call volume outpaced put volume by more than two-to-one on Monday, with total premium changing hands exceeding $1.3 billion. Still, the action has been costly for some, with $114 million in premium for the $235-strike calls expiring out-of-the-money last Friday, a pattern that repeated on Monday with the 225 and 222.5-strike calls.
Wall Street analysts remain broadly positive, forecasting Q1 FY2026 earnings of $1.70 per share on revenue in the mid-$70 billion range. This follows a fourth quarter where Nvidia reported revenue of $68.1 billion, up 73 percent year-over-year, driven by a 75 percent surge in its data-center business to $62.3 billion. Major cloud providers like Microsoft, Amazon, and Alphabet continue to signal massive capital expenditures on AI infrastructure, directly benefiting Nvidia as the dominant supplier of AI GPUs.
The consensus rating on NVDA stock is a "Strong Buy" with a mean price target of $271.03, implying about 15 percent upside from current levels. Morgan Stanley holds an "Overweight" rating with a $260 price target, while Goldman Sachs maintains a "Buy" rating and a $250 target.
The elevated options pricing suggests investors are paying a premium for exposure to the earnings event, which has become a major checkpoint for the entire AI and semiconductor sectors. The results on May 20 will test whether the company's growth trajectory can meet the market's high expectations. Investors will be watching the Q2 guidance closely for signs of continued demand acceleration.
This article is for informational purposes only and does not constitute investment advice.
