Nvidia ($NVDA$) is set to report quarterly results after the close on February 25. As the central force behind the global AI boom, Nvidia’s earnings carry significant weight for equity markets worldwide.
Ahead of the release, options markets are flashing clear signs of heightened expectations, offering investors an opportunity to position in a high-volatility environment.
I. Key Earnings Expectations and What to Watch
Consensus Estimates
Revenue: ~$61.08 billion, up ~60.6% year over year
Adjusted EPS: ~$1.533, up ~81.7% year over year
EBIT: ~$44.51 billion, up ~81.5% year over year
Focus Areas
Data Center (about 90% of revenue)
Sustainability of demand for AI accelerators such as H200 and B200, supply cadence, and performance of NVLink and networking products.
Margins
Whether Nvidia can maintain last quarter’s elevated levels: gross margin of 73.41% and net margin of 55.98%.
Other Segments
Sequential and annual performance in gaming, professional visualization and automotive.
External Factors
Supply chain stability — particularly capacity at TSMC — and the impact of overseas export restrictions.
Historically, Nvidia modestly beat expectations last quarter (revenue beat by 3.79%). Whether it can extend that pattern of upside surprises is a key debate heading into earnings.
II. Elevated Volatility Meets Bullish Positioning
As of February 25, Nvidia’s options market reflects the following dynamics:
High Implied Volatility
Implied Volatility (IV): 55.11%
IV Percentile: 78.49%
Current IV stands higher than roughly 78% of readings over the past year, indicating relatively expensive option premiums. The market is clearly pricing in a sharp post-earnings move.
Bullish Tilt in Positioning
Call/Put Ratio: 1.51, signaling heavier call activity.
For options expiring February 27:
Calls outstanding: ~485,000 contracts
Puts outstanding: ~248,000 contracts
Put/Call open interest ratio: 0.51
Key Strike Levels
$200 calls: Largest open interest (98,241 contracts)
$190 puts: Heavy positioning (36,424 contracts)
These levels represent important psychological markers.
Implied Move
Based on current IV and the spot price of $192.85, the market is pricing a roughly ±5.18% move through February 27 expiry, implying a range of:
$182.86 to $202.84
Given elevated IV, outright option purchases carry significant premium risk. Spread strategies offer a more cost-efficient and risk-defined alternative.
III. Selected Strategies: Balancing Offense and Defense
Below are two structured approaches tailored to differing market views.
Strategy 1: Bull Call Spread — Moderately Bullish, Defined Risk
View: Earnings will be solid, pushing shares modestly higher, though $195 may present near-term resistance.
Structure (Expiry: Feb 27, 2026):
Buy 1 × NVDA 190 Call (mid ≈ $7.50)
Sell 1 × NVDA 195 Call (mid ≈ $4.825)
$NVDA Vertical 260227 190.0C/195.0C$
Rationale
Cost Reduction in High IV: Selling the 195 Call offsets much of the 190 Call premium, reducing net debit to $2.675 per share.
Defined Risk/Reward:
Maximum loss capped at $267.50 per spread
Maximum gain capped at $232.50 per spread
Technical Alignment: The 190 strike is near spot and resistance; the 195 strike aligns with heavy open interest and strong liquidity.
P/L Profile
Max Profit: $232.50 (stock ≥ $195)
Max Loss: $267.50 (stock ≤ $190)
Breakeven: $192.675
Risk/Reward: ~1:0.87
Summary: Suitable for cautious bulls seeking upside exposure without paying elevated standalone call premiums.
Strategy 2: Bear Call Spread — Neutral to Slightly Bearish, Premium Collection
View: Post-earnings upside may be limited; shares could stall or consolidate.
Structure (Expiry: Feb 27, 2026):
Sell 1 × NVDA 195 Call (mid ≈ $4.825)
Buy 1 × NVDA 200 Call (mid ≈ $2.86)
$NVDA Vertical 260227 195.0C/200.0C$
Rationale
Sell Elevated Volatility: With IV at the 78th percentile, option sellers collect substantial time premium. Net credit: $1.965 per share.
Capped Upside Risk: The long 200 Call limits risk to $303.50 per spread.
Resistance Buffer: The 195 strike sits above near-term resistance (~$192.87), allowing room for limited upside before losses begin.
P/L Profile
Max Profit: $196.50 (stock ≤ $195)
Max Loss: $303.50 (stock ≥ $200)
Breakeven: $196.965
Favorable Scenario: Flat to modestly lower price action.
Summary: A classic high-IV premium-selling strategy, designed for investors expecting limited post-earnings upside.
IV. Risk Considerations
Directional Risk
Spread strategies still depend on price direction. Unexpected sharp moves against the position will generate losses.
Volatility Crush
Implied volatility typically collapses after earnings. While spreads are less sensitive than outright long options, IV contraction still impacts pricing.
Time Decay
With near-dated options, theta accelerates. If shares remain pinned between strikes, spreads can decay quickly.
Capped Upside/Downside
Spreads trade unlimited potential for defined risk.
Conclusion
Heading into earnings, Nvidia’s options market already reflects expectations for a sizable move. Outright call or put purchases are expensive.
The bull call spread and bear call spread offer structured, capital-efficient ways to express moderately bullish or neutral-to-bearish views with clearly defined risk.
Investors should align strategy selection with their earnings outlook and risk tolerance — navigating volatility in one of the AI sector’s most closely watched names.
Disclaimer: This analysis is based on publicly available data and consensus estimates. Strategy illustrations use midpoint pricing for demonstration purposes only and do not constitute investment advice. Options trading involves substantial risk and may result in total loss of capital.
