Unusual Option Talks? History Repeat?
The August earnings of $NVIDIA Corp(NVDA)$ left a deep impression on options investors, with high expectations in the market. Not only did the stock rally before the report, but there was also significant volatility during the after-hours trading session, reaching an all-time high price (over $530) until it was recently broken by the opening price of $502. The subsequent decline in the following trading days resulted in no profits for both call and put buyers.
The only viable and profitable strategy is to utilize volatility, such as going long on implied volatility (IV) before the financial report and closing positions before its release, or shorting IV a day before the report.
The Q3 financial report on November 21st is also a focal point for the entire AI market, as Nvidia is a leading player in this sector. Will history repeat itself in a simple manner?
Looking at the options activity on November 20th, the distribution of large orders for NVDA is highly imbalanced. Call options expiring that week are concentrated above $500 (with $550 being the trading center), indicating a market expectation of a 10% increase. On the other hand, there are very few open put positions, which are concentrated near $500.
Two strategies can be considered:
1. For those bullish on volatility, it may be better to take a one-sided approach as the probability of profiting from a straddle strategy is not high. The risk-to-reward ratio is higher anyway.
2. For those bearish on IV, consider a reverse iron condor or iron butterfly strategy for simplicity and higher capital utilization efficiency, as only one side requires margin.
3. Of course, if you are skilled at predicting closing prices, you can choose to do a butterfly strategy around the central point, where the profit ratio from the IV of over 100 will be high.
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Hard to say the day after the earnings report, but potential upside on ER today will be up 10% by the next earnings report unless there is something negative in the guidance.
Nvda has always gone through massive ebbs and flows. Some of the reasons leading to astronomical rise in the stock price are legitimate, and some are just pure hype. But one thing is certain: soon, after it’s possibly up another 10 or 20 percent
This time it’s already 505, so this will easily touch 540 to 550 after hours post earnings report
O. O. reality kicks in. I glad that I sold it 505. Will wait on the sideline for now.
It’s getting out of control. Panic sell closing in. Hair cut is approaching. SELL