Nvidia’s earnings report is the biggest market event left in 2024
The options market expects a bigger stock-market move from Nvidia’s earnings than upcoming jobs numbers, inflation data, or the Federal Reserve meeting.
Nvidia isn’t the best-performing stock in the S&P 500 this year, but it is the most important driver of the US benchmark index’s massive gains.
The chip designer singlehandedly accounts for about 23% of the S&P 500’s total return year to date, nearly as much as the rest of the Magnificent 7 combined.
And with the broader upswing in semiconductors faltering, there’s a lot of pressure on Nvidia to deliver when it reports quarterly results on Wednesday after the close. Analysts are looking for earnings per share of $0.74, and the company’s outlook will be closely scrutinized for signs on how much staying power is in the AI spending binge and how the deployment of its new Blackwell chip is going.
In a note on Sunday, Bank of America analysts led by Gonzalo Asis flagged how this company-specific event is also “a very big deal for the broader market.”
“The implied move for the S&P 500 on that day has been fluctuating with Nvidia’s own earnings implied move,” they write. “And options are assigning more broad market risk around Nvidia earnings than around next month’s non-farm payrolls and CPI days, and as much as the December FOMC.”
In other words, the options market is calling this the most important event left this year.
That same options market is showing signs of bullish sentiment on Nvidia through Christmas.
Looking at some metrics from Nations Indexes, the CallDex on the stock (how expensive purchasing one-month out-of-the-money upside is) is higher than the PutDex (the same thing, but for options that protect against drops) as of 10:24 a.m. ET today.
For the Friday expiry in particular, there’s far more open interest in out-of-the-money calls than out-of-the-money puts. Combined with the relative pricing of these options — a 5% out-of-the-money call has a higher implied volatility than a 5% out-of-the-money put option — this implies traders are optimistic on the outcome of Wednesday’s big event.
Bank of America’s team, however, sees opportunities on the other side of the trade.
“Given single stock fragility on the rise and easing post-election euphoria, we find it sensible to hedge the potential added impact on the broader market in case Nvidia disappoints,” they conclude.
