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Spring is nearly upon us, and you start to see changes happening, like plants beginning to sprout, or a warmer day amidst the cold. 

Essentially, there are signs that something is changing out there in the world.

The market’s not a bit different. The response to NVDA Corp (NVDA) earnings was just that type of event yesterday.

We’ll take a quick look at what the company reported - some interesting tidbits in there.

And then we’ll look at some Premove Pulses that offer us evidence of what the market’s biggest players - the “smart money” - are doing to prepare for those changes. 

That’s how we’ll seize the first-mover advantage as the change unfolds…

Here’s What Nvidia Brought to the Table

First, Nvidia - it’s the key to understanding what’s happening here. If you haven’t had a chance to take in what the company reported, here’s a summary:

Q4 2025 Highlights:

• Revenue: $39.33 billion, up 78% from $22.10 billion in Q4 20242.
• Earnings per Share (EPS): $0.89, up 71% from $0.52 in Q4 20242.
• Net Income: $22.07 billion, up 72% from $12.84 billion in Q4 20242.
• Gross Margin: 73.5%, down from 76.7% in Q4 20242.
• Data Center Revenue: $35.6 billion, up 93% from $18.4 billion in Q4 20242.

Year-over-Year Comparison:

• Revenue Growth: NVIDIA's revenue increased by 78% year-over-year, driven by strong demand for AI chips2.
• EPS Growth: The EPS grew by 71%, reflecting improved profitability2.
• Net Income Growth: Net income saw a significant increase of 72%, indicating robust financial performance2.
• Gross Margin Decline: Despite the revenue and income growth, the gross margin decreased by 3.2 percentage points, highlighting increased costs2.
• Data Center Revenue Surge: The data center segment experienced a remarkable 93% growth, underscoring the importance of AI and data center products

In most any other quarter, NVDA likely sees a big jump in share price, but today, it’s only mustering a 2% move after-hours. Yesterday’s expected move was for over 8%. That’s quite a difference when the company clearly blew away expectations!

As Blake Young and I discussed in our NVDA earnings webinar after the close yesterday, the news was priced in. That’s maybe an oversimplification and others may point to gross margin declining as the reason, but it’s more than that. 

Big Players Making the Dispersion Trade

If you thought NVDA was rallying last year because of the tremendous earnings and outlook story, you’re missing the sea change event that occurred on June 20, 2024. The stock was appreciating so significantly because of the “dispersion trade”. 

I’ll simplify it here, but the dispersion trade aims to profit from relative pricing differences - “dispersion” - among the individual stocks of some underlying index or sector. In this case, NVDA and the S&P 500 itself. 

Institutional traders were banking on NVDA outperforming the S&P 500. As a result, they were buying calls on NVDA and paying for them by selling options on the SPX. This created a massive gamma squeeze in NVDA and suppressed volatility in the SPX. 

The level of FOMO was great until the volatility changed on June 20. You could see it unfold in real time as the price reversed. I was watching Don at the time talk through the move that was happening, and he called it!

So yes, NVDA produced a fantastic report, but that misses the real point. The winds of change are upon us and it’s not February 2024 anymore. We may have to buckle-up for the wild ride ahead. 

First Mover Option Pulse

We’re looking for a first-mover advantage by identifying option pulses or prints that could impact the stock price. Here are three that I thought were significant yesterday:

Option Pulse #1

Barrick Gold Corp (GOLD)

Gold really stood out yesterday as it outperformed the S&P 500. Early this morning, the shine is fading a little… and it’s a stronger dollar that’s likely creating the weakness. That being said, some of the bigger dynamics may still be taking hold and this trade was reflective of that. 

• GOLD 7 MAR 25 $18.50 Calls

These were short-dated and at-the-money (ATM) calls that were bought. It’s indicative of the sentiment and has some ability to help move the stock as the price rises above that level. Yesterday was a nice bounce, and a break above $19 may help carry it back to prior highs near $21. 

Option Pulse #2

Kinder Morgan Inc (KMI)

Oil prices have been sliding back towards support near $67.50, but KMI is a mid-stream company that isn’t dependent on oil prices as much as demand. It’s experienced a degree of weakness following its last earnings report, but the pace of the decline has slowed as it is currently testing the December 18, 2024 support near $25.75. 

• KMI 17 APR 25 $28 Calls

At the closing price yesterday, the dividend yield was nearly 4.5%. This may attract some buyers as overall market weakness may lead to investors seeking dividends. As a near-term trade, targeting the $28 level would be a reasonable expectation and around a 7% move. 

Option Pulse #3

KraneShares CSI China Internet ETF (KWEB)

The option trade in Chinese stocks has been unrelenting. While I think there is risk in a Chinese Yuan revaluation (weakness), just like last October, we may not be there yet. 

• KWEB 17 APR 25 $38 Calls
• KWEB 21 MAR 25 $40.50 Calls

If we’re seeing a similar event as last September to October, there is a potentially right way and a wrong way to play it. As I’ve been discussing the past couple weeks, the equity side is risky as the reversals can be very swift and occur s0uddenly. 

How do you walk through the tightrope of opportunity and risk? Options can be a smart way to balance the risk/reward when volatility skew is in your favor. In the case of KWEB and many other Chinese stocks, the call implied volatility is rising as you move out-of-the-money (OTM). That means you can buy an OTM call that is closer to the stock price and sell one further out with higher implied volatility (buy high IV and sell low IV). 

• Buy KWEB 17 APR 25 $37 call option
• Sell KWEB 17 APR 25 $39 call option

This could potentially be done for around $0.55 debit. That means $55 risk per contract with a maximum gain of $145 per contract. If the price moves in the near term, you could look at taking profits around 70% ROR, or around $0.95. The risk is the entire premium if the price reverses, but that is good if the next move is significantly lower like October 2024. 

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