"Financial report curse" hard to break? NVIDIA Corporation (NVDA.US) stock price drops before earnings, options bulls face challenges.

This week, the market's attention is focused on the AI giant NVIDIA Corporation (NVDA.US), which will release its first quarter fiscal year 2027 earnings report after the US stock market closes on May 20th (Wednesday). As a core barometer that influences the tech sector and even the overall market direction, NVIDIA Corporation's performance has already surpassed the scope of individual stocks, affecting overall market sentiment. However, in the lead-up to the earnings report, NVIDIA Corporation's stock price saw a significant pullback, leaving the bulls caught in a difficult contrarian struggle. NVIDIA Corporation's stock price has fallen ahead of the earnings report, challenging bullish positions There is a classic saying in the options trading circle: "Sell a tiny, buy a Lamborghini," which bluntly means "short sell micro options and eventually buy a Lamborghini." This phrase accurately summarizes a high-probability options trading strategy: traders sell out-of-the-money options that have low premiums and little hope of exercising, steadily earning premiums. Over time, these small profits can accumulate into substantial gains. On the other hand, there are buyers who take on these low-cost options and ultimately end up losing all their investments. The trend in NVIDIA Corporation's stock price on Monday exemplifies this trading logic. NVIDIA Corporation's stock price dropped on Monday, falling more than 6.5% from its peak on Thursday of the previous week. This led to another challenging trading day for NVIDIA Corporation options traders, with a large number of popular short-term call contracts losing significant value or becoming worthless. Data compiled by SpotGamma shows that as of midday Monday, over 15% of NVIDIA Corporation options contracts expire at the close of trading that day. The most popular contracts include call options with strike prices of $225 and $222.5, with trading volumes exceeding 220,000 contracts each. Ironically, these contracts were profitable last Friday, and within just one trading day, they became worthless due to the stock price pullback, mirroring the situation from the previous Friday when call options with a $235 strike price saw their $114 million worth of premiums evaporate due to NVIDIA Corporation's stock price decline, resulting in heavy losses for speculators. Despite the continued weakening of the stock price and frequent "blowups" of short-term options, the bulls have not surrendered. On Monday, NVIDIA Corporation ranked fifth in options trading volume in the market, trailing only benchmark indices and Tesla, Inc., with over 3 million contracts traded, totaling over $1.3 billion in options premium, of which call options accounted for $1 billion. According to data from ThinkOrSwim, the trading volume of call options for NVIDIA Corporation on Monday was more than twice that of put options, but most calls were traded at or below the ask price, indicating that these call options were likely sold by investors rather than actively bought. Nonetheless, there are still determined bullish forces in the market. Four large trades involving the purchase of high-priced in-the-money call options expiring this Friday for NVIDIA Corporation were executed on Monday, with each trade amounting to at least $10 million. This indirectly reflects the ongoing optimism among some professional investors regarding NVIDIA Corporation's earnings performance, as they are willing to bet on a potential price rebound due to better-than-expected results. According to data from Cboe Global Markets Inc (Cboe) LiveVol, traders are expecting NVIDIA Corporation's stock price to fluctuate by up to 6.25% around the earnings report, which is in line with usual expectations but higher than the average actual volatility of 3.2%. For investors holding call options at this time, the situation is particularly dire. Historical data shows that NVIDIA Corporation's stock price has declined after the last three earnings reports, with a significant drop of 5.5% following the February earnings report this year. The "earnings curse" continues to loom over the stock. It will be a challenging task for the bulls to turn the tide in their favor with this earnings report. How important is NVIDIA Corporation's earnings report? Ultimately, the options game leading up to NVIDIA Corporation's earnings report is a reflection of the market's divergence on the future trend of the AI leader. Following the earnings report after the US stock market closes on Wednesday, as the results are revealed, this battle between the bulls and the bears will receive a partial answer. NVIDIA's performance will not only impact its own stock price but will also serve as a "barometer" for the AI sector and the overall tech stocks, guiding the direction of future market trends. The market generally expects NVIDIA Corporation to report earnings per share (EPS) of $1.76 for the first quarter, with revenue of $78.75 billion, significantly higher than the previous year's EPS of $0.96 and revenue of $44.06 billion. Data center revenue is expected to reach $72.85 billion, far exceeding the previous year's $39.11 billion. Prior to the earnings report, several Wall Street giants expressed optimism about NVIDIA Corporation and raised their price targets: Bank of America Corp raised its target price from $300 to $320, Wells Fargo & Company significantly raised its target price from $265 to $315; UBS Group AG raised its target price from $245 to $275; and Morgan Stanley raised its target price from $260 to $285. It is worth noting that NVIDIA Corporation's CEO Jensen Huang recently completed a visit to China with senior US officials, and comments on the company's cooperation layout in China at the earnings conference will be a market focus. There have been reports that the US has approved industry giants such as Alibaba Group Holding Limited Sponsored ADR, Tencent, and ByteDance to purchase NVIDIA Corporation's H200 series chips, which at one point pushed NVIDIA Corporation's stock price to hit a historic high, with a market cap surpassing $570 billion. However, UBS Group AG analyst Tim Arcuri pointed out that investors have been cautious in recent months, and only an outstanding earnings report can completely boost market confidence. As of the Monday market close, NVIDIA Corporation fell by 1.33% to $222.32, with a cumulative year-to-date stock price increase of 19%.