Nvidia’s first-quarter earnings results are set to make waves in the stock market this week, with the potential to move the entire S&P 500. The chip maker’s impressive revenue and profits have been a driving force behind the earnings growth of the S&P 500 over the past year, accounting for a significant portion of the overall growth.
Options pricing suggests that Nvidia’s earnings report could lead to an 8.5% move in the stock price, a significant decrease from previous earnings releases where the implied move was much higher. This highlights the uncertainty surrounding the impact of Nvidia’s results on the broader market.
Bank of America has provided a strategy for investors looking to hedge against the risk of Nvidia’s earnings affecting the market. Instead of buying options on major indices like the S&P 500 or Nasdaq 100, the bank recommends buying call or put options on Nvidia itself. This approach allows investors to directly hedge against the potential impact of Nvidia’s earnings on the market.
Nvidia options are seen as offering better value for hedging compared to options on broader indices, likely due to the strong liquidity and trading interest in the company. Bank of America advises investors to avoid using proxies and instead opt for Nvidia options for a more effective hedge.
As all eyes turn to Nvidia’s earnings report this week, the market is bracing for a potential shake-up based on the company’s performance. Investors are advised to consider their options carefully and hedge against any potential market swings that may result from Nvidia’s earnings results.
