Since its last earnings report, NVIDIA stock has jumped by 30.6%. Typically, NVIDIA’s average drift between earnings reports is 15.3%, with a usual range of ±16.7%. Right now, the stock’s drift-to-high is at 32.6%, which is much higher than the normal drift-to-high of 23.7%. This indicates a high level of excitement compared to past trends. However, such a significant drift does raise the risks involved, even if it doesn’t predict the stock’s future direction. **Post Earnings Announcement Drift (PEAD)** shows that stocks often continue trending after earnings reports. This happens because the market reassesses a company’s value based on new earnings information. This process can last for weeks or even an entire quarter, influenced by changes among institutions and evolving stories from analysts and the media. Looking back at NVIDIA’s history, 75% of positive drift cycles have resulted in an average daily move of 4.4%. While NVIDIA generally trends upwards after earnings, there have been quarters with sharp declines. The current drift is relatively small at just -4.5%, despite the excitement from traders. To understand earnings results better, traders should keep an eye on the stock’s immediate and short-term price changes. Investors should also evaluate their risk levels due to this high drift, thinking about both potential rewards and dangers. The current enthusiasm doesn’t guarantee good earnings but sets up high expectations. The options market is preparing for a 6.4% price shift, suggesting that caution is needed in trading. NVIDIA stock has risen over 30% since its last earnings report in May 2025, which is double its historical average. This indicates extremely high expectations for the upcoming announcement. This excitement creates a delicate situation where anything less than excellent results could lead to a sell-off. This optimism is backed by a supportive broader market. The Semiconductor Industry Association noted that global chip sales for the second quarter of 2025 increased by 22% compared to last year, driven mainly by data center demand. Additionally, Amazon Web Services recently announced a multi-billion dollar expansion of its AI infrastructure, significantly incorporating NVIDIA’s next-generation platforms. The options market is currently eyeing a 6.4% price movement either way after the earnings report. With such high implied volatility, purchasing options directly can be costly and risky. Therefore, we should consider strategies like spreads to manage risk and expenses better. For those who expect the rally to keep going, a **bull call spread** is a smart choice. This strategy helps limit upfront costs and clearly defines your maximum risk if the stock doesn’t meet high expectations. We saw a similar situation after the May 2023 earnings report when high expectations were surpassed. Conversely, if you think the stock is overextended, a **bear put spread** could be used to bet on a potential drop. In late 2022, we witnessed how quickly the stock could fall when guidance wasn’t strong enough to impress investors. A similar outcome might occur if the company doesn’t exceed expectations this quarter. Given the uncertain nature of this event, a **long straddle** might be a useful strategy for traders anticipating a major price move beyond what the market expects. This approach involves buying both a call and a put option at the same strike price and will be profitable if the stock shifts sharply in either direction, exceeding the 6.4% move already expected. No matter the initial strategy, we should closely monitor the price movement right after the earnings report. Observing the stock’s closing price on the first day and its trend over the following week will provide the best insight into whether major investors are buying shares or using the news to exit.

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