"Countdown to a major shake-up in US stocks? NVIDIA Corporation (NVDA.US) earnings report may open the 'Pandora's box' Traders hedging risks in advance"

Last Friday, the US stock market faced its largest sell-off in two months, breaking the surface calm of the market. Despite the S&P 500 hovering near historic highs and the VIX volatility index far below its five-year average level, undercurrents had been stirring, with some traders even preparing in advance for fluctuations. Last week, the ratio of open VIX call options to put options reached its highest level since September 2023, with over 1 million call options changing hands on Tuesday. Rising demand for protective options Investors began to increase their bets on the return of volatility, as Nvidia (NVDA.US) is set to announce its earnings after the US market close on Wednesday, which could be just the beginning of a series of fluctuations. While the return of US President Donald Trump to the White House and his tariff remarks so far have not panicked traders, warnings from analysts like Charlie McElligott of Nomura Holdings, Inc. Sponsored ADR and Scott Rubner of Goldman Sachs Group, Inc. have been growing louder. Brent Kochuba, founder of the options platform SpotGamma, said, "NVIDIA Corporation could impact the entire stock market." In a broader sense, "there are many catalysts for volatility to surge in the coming weeks, including tariffs and the deadline for the US government shutdown." Driven by the AI boom, Nvidia Corporation has more than doubled from its low point in October 2023, becoming a giant with a market value of $3.3 trillion. This upward trend has made Nvidia Corporation the second largest component stock of the S&P 500 index, making the broader market more vulnerable to the fluctuations of this stock. Since releasing its last earnings report in November last year, Nvidia Corporation's stock price has been fluctuating, and the plunge caused by the Chinese AI startup DeepSeek has exacerbated concerns. As of last Friday, options traders expected Nvidia Corporation's stock price to fluctuate by 7.7% after the earnings report, while the average price movement after earnings reports over the past eight quarters was 9.2%. The average volatility of the S&P 500 index in these days was 0.8%, higher than the daily average volatility of 0.6% over the past two years. Amy Wu Silverman, head of derivatives strategy at Royal Bank of Canada Capital Markets, said, "Nvidia Corporation's earnings report and any subsequent volatility will definitely trigger broader market fluctuations. Exceeding or falling below expectations in Nvidia Corporation's earnings report will have a ripple effect on AI and related companies." Apart from Nvidia Corporation, there are several catalysts in the coming weeks that may stimulate market volatility again. Measures by Trump to suspend new tariffs on Canada and Mexico will expire on March 4. Investors will see the latest US employment data three days later, and March 14 is the deadline to reach an agreement to avoid another US government shutdown. Chris Murphy, co-head of derivative strategy at Susquehanna International Group, said, "If truly influential tariff news is broadly negative, causing the stock market to move in sync or highly correlated, then we will definitely see volatility soar."