Wall Street is growing increasingly uneasy about an options-driven momentum trade that has helped push the S&P 500 index into record territory. As demand for bullish call options surges to its highest level in years, some analysts have set their sights squarely on Nvidia Corp.’s
NVDA,
-0.06%
Wednesday earnings report, warning that it could be the catalyst that slams the brakes on this trade, potentially reversing a substantial amount of the market’s rally over the past four months.
Their reasoning is rooted in the fact that investors have gotten so bulled up on risky options bets, the mere fact that the earnings report has passed could be enough to sink the main U.S. stock-market indexes due to the internal dynamics of the options market — even if Nvidia’s results satisfy Wall Street’s expectations, according to several derivative-market experts who spoke with MarketWatch. According to FactSet, analysts expect Nvidia to report earnings per share of $4.59, an increase of more than 700% from the same quarter last year. See: Nvidia may shine again when it reports on WednesdayTraders pile into bullish options at fastest pace since 2021 meme-stock frenzy As stocks rallied over the past year, taking many on Wall Street by surprise, investors have increasingly relied on options to chase the market higher and boost returns. This has caused demand for bullish out-of-the-money calls on the largest U.S. stocks to approach the most skewed level since the meme-stock craze of 2021, according to data from Cboe Global Markets, one of the biggest options-exchange operators. An option is said to be trading “out of the money” when the strike price of the option is above where the underlying stock or index is trading, in t …
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NVDA,
-0.06%
Wednesday earnings report, warning that it could be the catalyst that slams the brakes on this trade, potentially reversing a substantial amount of the market’s rally over the past four months.
Their reasoning is rooted in the fact that investors have gotten so bulled up on risky options bets, the mere fact that the earnings report has passed could be enough to sink the main U.S. stock-market indexes due to the internal dynamics of the options market — even if Nvidia’s results satisfy Wall Street’s expectations, according to several derivative-market experts who spoke with MarketWatch. According to FactSet, analysts expect Nvidia to report earnings per share of $4.59, an increase of more than 700% from the same quarter last year. See: Nvidia may shine again when it reports on WednesdayTraders pile into bullish options at fastest pace since 2021 meme-stock frenzy As stocks rallied over the past year, taking many on Wall Street by surprise, investors have increasingly relied on options to chase the market higher and boost returns. This has caused demand for bullish out-of-the-money calls on the largest U.S. stocks to approach the most skewed level since the meme-stock craze of 2021, according to data from Cboe Global Markets, one of the biggest options-exchange operators. An option is said to be trading “out of the money” when the strike price of the option is above where the underlying stock or index is trading, in t …nnDiscussion:nn” ai_name=”RocketNews AI: ” start_sentence=”Can I tell you more about this article?” text_input_placeholder=”Type ‘Yes'”]