To The Moon

$NVIDIA(NVDA)$ Q4 2026 earnings set to be released on Wednesday, 25 February 2026, after the market closes. Nvidia is expected to beat expectations, investor sentiment is tempered by "AI CAPEX fatigue" and concerns over the sustainability of massive infrastructure spending by hyperscalers.

As Nvidia prepares to report its Q4 2026 earnings on February 25, the market finds itself at a fascinating crossroads. While the company's fundamentals remain a "beating machine," the narrative has shifted from can they make the chips? to will the customers keep buying them at this rate?

In this article, I would like to examine the analysis of the market dynamics and the option strategies (Bull Call Spread (Debit Vertical) and Calendar Spread (Time Spread) that we are contemplating to deploy.

Market Reaction: The "Beat" vs. The "Fatigue"

Historically, Nvidia has often "sold off" or remained flat even after beating expectations if the guidance or macro commentary didn't significantly clear a very high bar.

Why we might see a "Sell the News" event:

• The Law of Large Numbers: Analysts expect revenue around $65.6B (up ~65% YoY). As the numbers get massive, maintaining the "explosive" growth percentage becomes harder.

• Capex Fatigue: Investors are worried about the "Return on Investment" (ROI) for hyperscalers like $Microsoft(MSFT)$ Microsoft, $Meta Platforms, Inc.(META)$ Meta, and $Alphabet(GOOGL)$ Google. If Nvidia’s guidance shows even a slight normalization of growth, the market may interpret it as the "peak" of the cycle.

• Priced for Perfection: With a forward P/E sitting around 40–45x, any commentary regarding "order pauses" before the full Rubin architecture ramp in late 2026 could trigger profit-taking.

Why the reaction could remain Bullish:

• Hyperscaler Commitment: Combined 2026 AI spending from the "Big Four" is now projected to exceed $600B–$650B.

• Blackwell Demand: If Jensen Huang confirms that Blackwell is "sold out" well into 2027, it effectively kills the "fatigue" narrative by proving the demand is supply-constrained, not demand-constrained.

Comparing Option Strategies

Given the environment of high "event volatility" (the IV crush after earnings), choosing the right structure is vital.

Strategy A: Bull Call Spread (Debit Vertical)

• Setup: Buy a Call at Strike A (e.g., At-the-Money), Sell a Call at Strike B (Out-of-the-Money).

• Best For: A directional bet where you expect a moderate-to-strong move up but want to mitigate the high cost of NVDA options.

Strategy B: Calendar Spread (Time Spread)

• Setup: Sell a Near-Term Call (expiring Feb 27) and Buy a Longer-Term Call (expiring March or later) at the same strike.

• Best For: A "Volatility Play" where you expect the stock to stay relatively stable or move slowly toward the strike price.

Which is more appropriate?

• Choose the Bull Call Spread if you believe the "Capex Fatigue" is overblown and Nvidia will provide a massive "beat and raise" that pushes the stock up 5–10%. It is a cleaner way to play a directional breakout.

• Choose the Calendar Spread if you think the market is "stuck" and the stock will "chop" around current levels ($185–$195) as investors digest the news.

Our Peer Perspective: Given NVDA’s history of massive moves (the 6.5% implied move suggests an $11–$13 swing), a Bull Call Spread is generally more "appropriate" for an earnings play.

Calendar spreads are often "blown out" by the high realized volatility of Nvidia earnings; if the stock gaps up $20, your short call will move deep into the money, potentially turning your "bullish" calendar into a losing trade.

In the next section, we would like to share how in order to calculate the specific break-even prices, we first need to establish the current market context. As of February 23, 2026, Nvidia (NVDA) is trading around $189.82. The options market is pricing in an implied move of approximately 6.5% (roughly $12.30) for the earnings announcement on February 25.

For a Bull Call Spread (Long Call Vertical) expiring on February 27, 2026, we will look at an "At-the-Money" (ATM) strike and an "Out-of-the-Money" (OTM) strike based on current premiums.

Example Bull Call Spread Setup

• Buy (Long) Call: $190 Strike (ATM)

• Sell (Short) Call: $200 Strike (OTM)

• Expiration: Feb 27, 2026

Note: Based on current IV (Implied Volatility), a $190 call is trading near $8.40 and a $200 call is trading near $4.10. Let's use these estimates for the calculation.

Break-Even Calculation

The break-even price for a Bull Call Spread is calculated using this formula:

{Break-Even} = {Long Strike Price} + {Net Debit Paid}

Step-by-Step:

1. Net Debit: $8.40 (Cost to Buy) - $4.10 (Credit from Sale) = $4.30 per share ($430 total).

2. Break-Even: $190 + $4.30 = $194.30.

The Verdict: At expiration (Friday, Feb 27), NVDA must be trading above $194.30 for you to start seeing a profit. This requires a 2.3% move to the upside from the current price.

Risk/Reward Profile

Comparison of Scenarios

Strategic Summary: Bull Call vs. Calendar

In the context of the AI Capex Fatigue that was mentioned:

• Bull Call Spread (Better for a "Pop"): This is better if you believe the fatigue narrative is wrong and Jensen Huang will trigger a "relief rally" above $195. It protects you from the IV Crush (the sharp drop in option prices after earnings) because the short call you sold also loses value, offsetting the loss on your long call.

• Calendar Spread (Better for "Sideways"): This would be your choice if you think the market will "yawn" at the results and stay between $185 and $193. However, if NVDA moves more than 5%, this strategy often loses money as the short-term leg gains value too quickly against you.

Summary

As Nvidia prepares to report its Q4 2026 earnings on Wednesday, February 25, 2026, the market is balancing "insane" demand for Blackwell chips against a growing fear that the AI infrastructure build-out is nearing a local peak.

Below is an analysis of the earnings setup and the option strategies you are considering.

1. Earnings Preview & Market Sentiment

Nvidia is entering this report as a victim of its own success. While a "beat" is widely expected, the focus has shifted from current numbers to the durability of Hyperscaler Capex (capital expenditure).

Key Forecasts (Q4 FY2026)

• Revenue: Consensus is ~$65.6B (up ~65% YoY). Some analysts (Citi) are even more bullish at $67B.

• EPS: Expected at $1.46 – $1.52.

• Data Center Revenue: Projected to hit nearly $60B, driven by the Blackwell architecture ramp.

The "Sell-the-News" Risk: AI Capex Fatigue

The market is currently wrestling with "Capex Fatigue"—the fear that Microsoft, Meta, and Amazon cannot sustain $200B+ annual AI spends without seeing immediate bottom-line ROI.

• Likely Reaction: If Nvidia beats but fails to significantly raise its Q1 2027 guidance (currently expected at $73B–$75B), we could see a "sell the news" event.

• The Bull Case: If Jensen Huang confirms a "Blackwell sold out into 2027" narrative and shows broadening demand from "Sovereign AI" (nations building their own clusters), it could break the fatigue narrative and trigger a massive rally.

2. Trading Strategies: Bull Call Spread vs. Calendar Spread

Given the Implied Move of approximately ±5.7% ($10.80), choosing the right structure is a trade-off between directional conviction and volatility management.

Approach A: Bull Call Spread (Long Call Vertical)

• Goal: Capitalize on a bullish move while reducing the high cost of NVDA options.

Mechanics: Buy a $190 Call / Sell a $200 Call (for example).

Approach B: Calendar Spread (Time Spread)

• Goal: Profit from the difference in time decay (Theta) and volatility (Vega) between two different expirations.

• Mechanics: Sell a Call expiring Feb 27 / Buy a Call expiring Mar 20 at the same strike (e.g., $190).

Which is more appropriate?

• Bull Call Spread is better for this event. Nvidia earnings are rarely a "quiet" affair. Since the market is already pricing in a "perfect" outlook, a Bull Call Spread allows you to bet on a positive breakout while protecting against the inevitable Implied Volatility (IV) Crush.

• Calendar Spreads are generally too risky for Nvidia earnings. If the "Capex Fatigue" causes a sharp sell-off OR the "Blackwell Demand" causes a sharp rally, the calendar spread will likely fail. It is better used for stocks with more predictable, range-bound reactions.

Current Break-even Estimate: If you buy a $190/$200 Bull Call Spread for a net debit of ~$4.30, your break-even is $194.30.

Appreciate if you could share your thoughts in the comment section whether you think "Capex Fatigue" is overblown and market is “stuck” and Nvidia could still surprise.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire @MillionaireTiger appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.