To The Moon

After the market closes on August 28, $NVIDIA Corp(NVDA)$ the AI chip giant, will release its Q2 2025 earnings report. This report is crucial for investors to gauge whether U.S. companies are still heavily investing in AI technology, and it is one of the most significant tech earnings reports this season. It will determine if the AI trade continues.

Analysts expect NVIDIA to report Q2 revenue of $28.639 billion, up 112.03% year-over-year, and earnings per share of $0.60, up 141.49%.

Bloomberg forecasts that NVIDIA's critical Data Center segment will achieve $25.023 billion in revenue, up 142.40% yoy, making up 87% of total revenue, up from 86% last quarter. The Gaming segment is expected to generate $2.793 billion, a 12.34% increase.

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Over the past 12 quarters, NVIDIA’s stock has risen 75% of the time on earnings day, with an average change of ±8.1%, a maximum gain of +24.4%, and a maximum loss of -7.6%. In the last six quarters, $NVIDIA Corp(NVDA)$ 's stock movements were +14%, +24.4%, +0.1%, -2.5%, +16.4%, and +9.3%.

Some investors are bracing for big swings. Currently, NVIDIA's implied volatility is ±10.6%, suggesting a 10.6% move after earnings. For comparison, the average post-earnings move in the past four quarters was ±7.1%.

With NVIDIA’s earnings report approaching, investors can use different strategies based on their expectations for the stock. As of August 27, NVIDIA closed at $128.30. While this is useful, the August 28 closing price will be a better benchmark. Here are three options strategies to consider: for hedging, bullish/bearish positions, and short volatility.

1.Hedging Strategy: Collar

To protect against downside risk and manage costs, the Collar strategy can be effective. This involves combining a Protective Put and a Covered Call.

Step 1: Sell a call option expiring on August 30 with a strike price of $140, earning $261 in premium.

Step 2: Buy a put option expiring on August 30 with a strike price of $117, costing $242 in premium.

These trades, combined with holding the stock, create a Collar strategy with a net premium of $19.

The Collar strategy caps losses. If $NVIDIA Corp(NVDA)$ [Miser][USD]falls below the put option’s strike price of $117, losses are limited regardless of how low the stock price goes. Even if the stock drops to $1, the maximum loss is capped at $1,113 (strike price of the put - stock price + call premium - put premium).

The Collar also allows for potential gains. If the stock rises to the call option’s strike price of $140, the maximum profit is $1,172 (call strike price - stock purchase price + call premium - put premium).

Overall, the Collar strategy offers a balanced approach to managing risk while still allowing for gains, providing flexibility for navigating NVIDIA’s earnings report.

2.Bullish Strategy: Bull Put Spread

For investors without $NVIDIA Corp(NVDA)$ positions who expect a post-earnings surge, a Bull Put Spread is a good low-risk strategy.

If you anticipate the stock will rise but want to limit potential losses, the Bull Put Spread is a solid choice.

Step 1: Sell a put option with a $160 strike price expiring this Friday.

Step 2: Buy a put option with a $128 strike price expiring on the same day.

In this scenario, using the simulated prices, the breakeven point is $134.70. If $NVIDIA Corp(NVDA)$ rises to $160, you’ll see a maximum profit of $2,530. If the stock falls to $128, the maximum loss is capped at $670.

The Bull Put Spread offers a favorable risk/reward ratio, making it suitable for conservative investors. If you seek higher returns, you could buy call options with strike prices of $160 or $170, but the risk of losing the entire investment increases. Short sellers can also adjust strike prices to set up a similar spread strategy.

3.Volatility Strategy: Iron Condor

For those who don’t want to predict NVIDIA’s direction but want to profit from volatility, consider an Iron Condor. Reviewing the past 12 quarters, NVIDIA's stock price has fluctuated an average of ±8.1%, with the highest increase at +24.4% and the largest drop at -7.6%.

Based on this, you can bet that NVIDIA’s price will remain within ±15% of its current price of $128.30, which means between $109 and $147.50.

Step 1: Sell a put option with a $109 strike price.

Step 2: Sell a call option with a $148 strike price.

This creates the Iron Condor strategy. If $NVIDIA Corp(NVDA)$ ’s price stays between $109 and $148 after earnings, you’ll make a maximum profit of $205.50. The Iron Condor provides high safety margins, making it a reliable strategy when facing uncertainty, though the profit is lower compared to other strategies.