Nvidia (NVDA) has cemented itself as a central player in the AI race, emerging as a leader among technology stocks. As the second-largest component of both the Nasdaq and S & P 500 by market cap, its earnings hold significant weight in shaping market sentiment. With markets already under pressure, all eyes are on NVDA’s upcoming earnings. As earnings day approaches, uncertainty in the market increases, with traders anticipating significant price swings. While it’s well established that earnings reports influence stock prices, forecasting the direction of the move remains challenging. The chart below illustrates NVDA’s percentage price changes from its earnings announcement to the nearest options expiration Friday. While this historical data helps gauge the typical magnitude of post-earnings moves, it doesn’t necessarily provide clues about the upcoming reaction. Fortunately, for highly liquid stocks like NVDA, the options market offers a reliable estimate of the expected price range post-earnings. Though surprises—especially major beats or misses — can lead to outsized moves, this projected range serves as the foundation for my trade setup today: a pre-earnings iron condor. As traders anticipate major events like earnings announcements, demand for options surges, driving up the prices of contracts expiring shortly after the event. This additional cost, often referred to as “juice” or “premium,” is captured in the implied volatility (IV) of the options. IV is a crucial metric used to gauge how much movement the options market expects following an earnings release. In this case, NVDA’s expected move is estimated at $13 (or 10%) in either direction. Once earnings are announced, the uncertainty disappears, causing IV to drop sharply. This effect, known as IV implosion, is immediately reflected in options pricing on the following trading day. As a result, options lose their inflated premium, often experiencing a significant drop in value. This is why options buyers frequently lose money on earnings plays — even if the stock moves in their favor. The collapse in IV offsets the gains from directional movement, making post-earnings option strategies highly dependent on both price direction and volatility contraction. From the options chain, I can extract two key insights: Implied volatility (IV) is highly inflated, and all the excess premium (or “juice”) will be removed from the options by Thursday morning after earnings are announced on Wednesday evening post-market. The options market is pricing in a $13 move (up or down) for NVDA following earnings. However, one major unknown remains — the direction of the move. Fortunately, for this trade setup, direction doesn’t matter. The two known factors — IV contraction and expected move range — are all that’s needed to construct this trade. The trade Selling an iron condor is an options trading strategy where you simultaneously sell out-of-the-money call spreads and put spreads. Since you are selling spreads (instead of selling naked calls and puts, your risk and reward are both defined at the time of entry). To construct this trade, all I need to do is figure out two things: Which strikes to choose to sell the call spread? Which strikes to choose to sell the put spread? Once I figure this out, all I have to do is enter this entire trade as one single unit also known as an iron condor. Most trading platforms will allow one to sell this kind of trade with minimal effort. To construct the PUT SPREAD that I will be selling, here is what I need to do: The option chain above shows that 130 (current price) – 13 (expected move) is 117. This means that NVDA is not expected to drop below 117. To add some more buffer to this, I could sell a 114 put option and buy a 113 put option at the same time (thereby constructing my put spread side of the trade) For the CALL SPREAD side of the equation, I need to do something similar. Again, the option chain above shows that 130 (current price) + 13 (expected move) is 143. This means that NVDA is not expected to pop above 143. We could add some more buffer to this as well and sell a 146 call option and buy a 147 call option simultaneously. This wraps up the call side of the equation. As mentioned earlier, most trading platforms will allow you to put this trade as one unit by selecting “Sell Iron Condor” as the trade structure. Here is the exact trade setup SELL -1 NVDA 146-147 C/114-113 P Iron Condor CREDIT (also max profit): $33 MAX LOSS: $67 Entering the trade 1-2 hours before market close on earnings day maximizes premium. The longer you wait, the higher the premium. The put side has an 82% success rate, and the call side 85%. High-probability trades mean higher risk than max profit, so clear risk/reward targets are essential If the stock doesn’t move beyond the expected range, this trade will be profitable and can be closed on Thursday morning at market open. Closing losers at a 60-70% loss still results in a profitable strategy over multiple trades. I cover many of these setups in my book Mean Reversion Trading and provide further insights and resources on my website https://tradingextremes.com -Nishant Pant Founder: https://tradingextremes.com Author: Mean Reversion Trading Youtube, Twitter: @TheMeanTrader DISCLOSURES: (None) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Nvidia is expected to move 10% in either direction on earnings. How to trade it
