Nvidia options traders are being overly optimistic about how earnings will affect the stock, according to Lawrence G. McMillan. The tech bellwether’s recent option pricing illustrates this point.
In the fourth quarter of 2024, an at-the-money straddle with Nvidia priced at $14 was sold before earnings. On the day after the announcement, Nvidia surged eight points higher and then traded down four points before closing one point higher. This experience shows that paying $14 for the straddle would not have been a profitable move.
Source: https://www.marketwatch.com/story/nvidia-options-traders-are-vastly-overestimating-how-earnings-will-move-the-stock-691a6db1