Will NVIDIA Rise or Fall? 3 tips for earnings season options trading!

Hello everyone!

Earnings season is like a market battlefield, full of rapid shifts that can bring joy to some and disappointment to others.

In these volatile times, capturing market opportunities isn't easy.

To thrive during earnings season, you need the right skills and strategies.

Today, I’ll share some tips to enhance your options trading success!

In options trading, the key to success lies in accurately predicting the future direction of stock prices.

As individual investors, we can leverage the insights of professional investors.

They conduct in-depth research on public companies, provide ratings, and predict target prices to help us understand market trends.

Consensus Rating: Helps you grasp analysts' general view of the company's fundamentals—whether it's worth buying, holding, or selling.

Target Price: Assists you in judging the price range for the company over the next year, providing a reference for your investment decisions.

Popular Analysts: Helps you find the "homework" of analysts with high success rates as a stock-picking reference. The more stars under an analyst's photo, the better their past performance, making their conclusions potentially more valuable.

In the Estimates section, you can delve into the company's financial status. This data, sourced from S&P, is a reliable information source.

Revenue: Helps you assess the company's income trend.

Earnings Per Share (EPS): Provides a basis for evaluating the stock's potential value.

These tools give you a clear understanding of the company's fundamentals, helping you better assess stock price trends and potentially boost your options trading success.

Of course, I must emphasize that a strong performance outlook doesn't guarantee a stock will rise; it's merely a potential positive signal.

Similarly, a weak performance outlook doesn't mean a stock will definitely fall; it should be used as a reference, not an absolute guarantee.

For seasoned options traders, implied volatility (IV) is a familiar concept.

It represents the market's expectations for future stock price fluctuations and influences options pricing.

Generally, the market believes that, without considering direction (Delta neutral), you should consider buying options when IV is low and selling when IV is high.

Before uncertainties like earnings releases, market expectations often surge, with diverse opinions on future trends, leading to a spike in IV.

However, once earnings results are out and uncertainties lessen, IV usually drops quickly, known as the "IV Crush."

Thus, accurately assessing IV levels is crucial for successful options trading.

Before opening options positions, ensure you identify whether the current IV is already high.

If you want to delve deeper into the IV percentage and IV rank shown on the chart, click the "i" in the top right corner for more information.

Remember, investing carries risks, and strategies should be applied with caution. Wishing you great success in the market!

If you expect the stock price not to fall, consider selling a Put.

If you expect the stock price not to rise, consider selling a Call.

While this strategy allows you to collect two premiums upfront, it carries the risk of losses if the stock price moves significantly in either direction.

Therefore, ensure you make accurate judgments before implementing this strategy.

Earnings season is ripe with opportunities. If you're unsure about which direction to take, why not check out "Options Unusual Activity"?

Options Unusual Activity refers to sudden, significant changes in the trading volume of specific options, which might indicate big investors' predictions about the market.

– Financial Power: With substantial funds, they can dominate in the options market.

– Information Access: They have access to more comprehensive market data than regular investors.

– Technical Expertise: Equipped with advanced technology and professional teams, they can make more precise decisions.

Since we're betting on earnings, pay special attention to options marked with an "E," indicating that their expiration dates are around the earnings release. Focus on those with an "E."

On November 19th, Eastern Time, just a day before the earnings release, we noticed two large orders with a combined value exceeding $4 million. Such big moves usually have a significant market impact.

The system flagged these trades as "Floor" and "Multi-leg" strategies.

What's a "Floor" trade? These orders are typically executed by experienced professional traders on the exchange floor, using various strategies that are worth analyzing and referencing.

For the multi-leg order, the investor's strategy might involve using complex tactics to hedge risks or seize specific market opportunities.

Multi-leg strategies often involve simultaneously buying and selling multiple options to achieve a particular market expectation or risk management goal.

On November 18th, we spotted another large multi-leg order with a trade value of around $3.42 million.

This order involved buying a Call with a strike price of 150 and selling a Call with a strike price of 148.

This strategy is typically used when you expect the underlying asset's price to decline, but with limited downside.

If NVIDIA's stock price falls to 148 or lower, the strategy will achieve maximum profit, as both options would expire worthless, and the investor pockets the premium from the sold option.

However, if the stock price rises above 150, the investor faces maximum loss because the bought option would be exercised, and the sold option would require paying the difference.

The clever part of this strategy is that it not only hedges some investment risks but also allows for profits under specific market conditions.

Alright, that's it for today's sharing. The earnings season is full of opportunities, and the key lies in using information to safeguard your investments.

By keeping an eye on earnings forecasts, implied volatility, and options unusual activity, you can gain a better understanding of market dynamics and optimize your investment decisions.

If you have any questions or want to learn more strategies, feel free to leave a comment below.