Options market thinks Nvidia shares will rise after latest earnings

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Options market thinks Nvidia shares will rise after latest earnings

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. Nvidia’s meteoric rise suffered a bit of a swoon this summer. The stock closed at $98.91 per share on Aug. 7, about 27% below its all-time high in June. But the stock has since erased most of those losses, closing at $123.80 per share on Thursday. NVDA YTD mountain Nvidia’s rally has been a key driver of this bull market. The market optimism about Nvidia extends beyond the immediate ******* after the earnings report, according to Piper Sandler. “We focused on shorter-dated options, largely on account of next week’s release. However, the rest of the surface isn’t necessarily priced fairly, either. E.g., upside is also rich over the longer haul, again strictly based on volatility forecasts (over corresponding horizons) rather than fundamental,” the note said. The Piper Sandler researchers did not take a fundamental position on Nvidia’s earnings report. There are several ways investors could use options to bet on upside for Nvidia. One of the simplest ways would be to purchase a call option with a strike price that is “out of the money.” If Nvidia rises above that strike price before the options expires, then the trade could be *********, allowing the investor to buy it at a discount. However, the market pricing described by the Piper Sandler note means that the up-front premium for this strategy would be higher than usual for a stock with Nvidia’s volatility profile. This would in turn create a higher bar for the trade to be profitable, and mean that the trade would be more costly if the option expires worthless.

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