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Nvidia To the Moon | Implied Volatility and Earnings | Earnings and Markets Have Low Correlations? | Nvidia Cheap?

By Derek Moore

Show Summary:

Derek Moore and Jay Pestrichelli, CEO of ZEGA Financial, discuss Nvidia’s beat on earnings, their march towards $2trillion market cap, and how as earnings forecasts rise, even though the stock has made new highs, forward PE ratios go lower. Then, they explore what the options market via implied volatility was forecasting for an Nvidia move post earnings. Later, they review a comparison between the S&P 500 Index annual return vs the EPS growth to see if there is any relationship. Hint, it’s not too correlated even when they compare the current year market performance against the 1 year forward actual earnings. All that and more will be explained including some recommendations. 

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Topics Include:

  • Nvida’s stock is rising while its forward PE just got cheaper
  • Nvidia’s recent earnings beat including EPS growth, revenue growth, and gross and net margins
  • What would it take for Nvida to overtake Microsoft as the largest company in the S&P 500?
  • Implied move post earnings based on the implied volatility of the options market
  • Price of the at the money long straddle on Nvidia the afternoon of earnings
  • Regression analysis of S&P 500 Index annual return vs EPS growth
  • Correlations between market returns and earnings growth
  • Comparing correlations with same year market returns vs same year and 1 year forward EPS 
  • Markets are forward looking
  • Probability of Nvidia reaching $3.06T in market cap in one year per options market

Mentioned in this Episode:

Where returns come from see start of page 23 in Semper Augustus group letter 

Jay Pestrichelli’s book Buy and Hedge 

Derek’s new book on public speaking Effortless Public Speaking 

Derek Moore’s book Broken Pie Chart 

Contact Derek derek.moore@zegafinancial.com 

Did you miss last week’s episode where Jay and Derek covered:

Put & Call Implied Volatility Mismatch? | US Dollar vs S&P 500 Correlation | Sticky Inflation | Japan Recession | Explaining Why Stocks Go Up (or down)

Listen Here: