Starting this thread to start a discussion… get this… AHEAD OF TIME since I know it’ll be a hot topic as the day approaches. NVDA is on a hell of a run given the prevalence of AI. As we discussed in the last VC meeting, AI is a bubble that hasn’t even formed properly yet but regardless, NVDA is potentially overshooting it’s target in the here and now.
So let’s discuss NVDA as an earnings play as it at face value seems like one of the more attractive of recent memory.
I’ve looked at options for the ER for the last few days and it’s pricey and I have no idea which way their earnings will go. Looked at CSPs as a result of your post, but the IV isn’t jacked up enough for me at a 0.20 delta to lock up 28k for a measly $360 (when I compare the CSP returns for AAPL or TSLA.)
We were chatting in TF about NVDA earnings coming up Wed PM, noting some of that here.
From a technical point of view, NVDA tested the 20SMA resistance twice, and failed. It also closed below the 50SMA on Friday, despite it being a green day. (Image 1) I read this as markets not feeling very optimistic about it at the moment, and if earnings are bad, we could see quite a bit of correction.
There is that ~320 - ~360 gap to fill below. That’s where the correction could take us, if earnings are bad. It’s a 15-25% correction, but NVDA is up 190% YTD, so isn’t insane. It also does not mean it happens right after earnings - it can take a while to bleed out.
Difficult to see how we play this with options, which are pricing in a 10% move on earnings. (Image 2) And NVDA could still surprise to the upside, which could make it moon quite a bit more since folks seem to be bearish.
This is all to say that, to me, the setup looks nice for a post-ER play. Not before.
Honestly I don’t think that they would have up their guidance last Q if they didn’t think they would actually deliver those numbers. Just 2-3 weeks ago China ordered about 5 billion from them. They will beat but the real question here is if the demand has changed, if they have huge back orders and can’t keep up with production. But also TSM did not beat last earnings, aren’t they one of NVDA chip makers if not their larger supply? Hmmmm This is where it gets interesting.
If it is a miss, I am strongly inclined to agree with @the_ni , in that, we will likely see it head to cover that gap.
The biggest potential I see, however, in terms of misses is a backlog from manufacturers. NVDIA has 2 chip manufacturers, Taiwan based TSMC ($TSM) and NY based GlobalFoundries Inc. ($GFS), both of which were a bit underwhelming in their respective ERs. Most people disregard GFS because TSM does manufacturer a solid majority of the chips, by most sources, but they both tend to move similarly and have both faced pretty significant constraints over the last couple of years.
Personally, I am bullish on NVDA for ER, but I don’t think we will see as massive of a move up.
For those looking to play NVDA earnings, consider SMH. The IV isn’t nearly as bad and it’s followed a similar trajectory as NVDA. Ni mentioned NVDA’s gaps, SMH has similar gaps down to 130-135, currently 148. I’m consider 145 puts following this earnings pump as I’m expecting selloff either way.
That is a great suggestion, @Dany001 - sympathy plays might be a great way to play NVDA earnings without having to stomach nearly anywhere as much of a volc crush.
As for that $780 PT, it certainly adds to the bullish sentiment, though this clown of an analyst actually downgraded NVDA to $136 just 8 months ago, confirming that such analysts are excellent lagging indicators
And these analysts scare more. If I was bullish until last night, now I’m kinda skeptic. Will know more by tomorrow how NVDA opens. I sold my positions today just to be on the safe side and I don’t regret it. It got an upgrade last Monday too if I’m not wrong that ran over $20 and shit for the rest of the week until Friday where it started picking up. I actually added to the watchlist 400p. Let’s see
SMH is a semiconductor ETF and its IV is pretty low with decent volume so spreads aren’t bad + you can sell and close pretty easily. SMH moves a lot with NVDA and you can see with last earnings. I’m playing that one