A $300 billion shock is coming! The options market is betting that NVIDIA will fluctuate by nearly 10% after its earnings, with a strong "FOMO" sentiment

According to Zhitong Finance, traders in the US stock options market expect that the upcoming financial report of NVIDIA (NVDA.US), the world's leading artificial intelligence chip manufacturer, will trigger a market fluctuation of over $300 billion in its own stock price. Data from the analysis company ORATS shows that option pricing indicates traders expect a fluctuation of around 9.8% in the company's stock price on Thursday, with the company set to announce its performance after the US stock market closes on Wednesday. ORATS data shows that this fluctuation is higher than the expected increase before NVIDIA's financial reports over the past three years, and significantly higher than the stock's average post-earnings fluctuation of 8.1% during the same period.

Analysts say that considering NVIDIA's market value of about $3.11 trillion, a 9.8% fluctuation in its stock price would translate to approximately $305 billion, possibly the largest expected post-earnings fluctuation for any company in history. According to data from LSEG, this fluctuation would surpass the market value of many constituents of the S&P 500 index, such as Netflix (NFLX.US) and Merck (MRK.US), whose market values are only around $300 billion.

Goldman Sachs also stated that if NVIDIA rises after the financial report on Wednesday, most investors may be caught off guard. In a report on Monday, Goldman Sachs' trading department indicated that NVIDIA's stock market value could experience a significant fluctuation of nearly $300 billion after the announcement of its second-quarter earnings on Wednesday, based on recent option pricing data.

Whether up or down, this market value fluctuation is equivalent to a potential change of over 9% in the stock price of this chip manufacturer with a market value exceeding $3 trillion. NVIDIA holds the record for the largest single-day market value fluctuation, reaching $330 billion, which occurred at the end of July when the stock rebounded from a weeks-long decline.

NVIDIA is currently the second largest company in the S&P 500 index, with a weight of about 6.5%, so its performance may have a significant impact on the entire market. In fact, Steve Sosnick, Chief Strategist at Interactive Brokers, emphasized NVIDIA's core role in the overall market. Sosnick analyzed the 25 most active trades on the Interactive Brokers platform in a report on Tuesday, with over 70% of them being related to NVIDIA.

NVIDIA's performance has a significant impact on the overall market mainly because the company's chips are widely regarded as the gold standard in the field of artificial intelligence. The stock has risen by about 150% this year, contributing about a quarter of the S&P 500 index's 18% gain so far this year. Sosnick stated, "Just this alone has made a huge contribution to the overall profitability of the S&P 500 index, supporting the market."

Option pricing indicates that traders are more concerned about missing out on a significant increase in NVIDIA's stock price rather than being impacted by a sharp decline. According to Susquehanna Financial's analysis of option data, traders believe there is a 7% chance of the stock rising by over 20% by Friday, while the probability of a decline of over 20% is only 4%.

Sosnick said, "People usually want to buy hedges (before earnings), they want to buy insurance, but in the case of NVIDIA, a lot of the insurance is FOMO (fear of missing out) insurance." "They don't want to miss out on an uptrend."

One reason why options traders are pricing in a significant increase in NVIDIA's stock price is partly due to the company's past volatility. According to analysis of Trade Alert data, NVIDIA's average 30-day historical volatility (measuring the magnitude of rolling price fluctuations within 30 days) this year is about twice that of all other companies with a market capitalization exceeding $1 trillion.

Christopher Jacobson, a strategist at Susquehanna Financial Group, a market maker for NVIDIA securities, said, "Options just reflect the actual trend of the stock. This is just the ongoing uncertainty/optimism about artificial intelligence, as well as the eventual scale of the opportunity, coupled with NVIDIA's status as a stock widely sought after by institutions and retail investors."