Nvidia (NVDA) stock has rallied hard in May, gaining 24% in the past month.
That leaves many investors wondering if it’s a good time to pile into the stock ahead of the chip giant’s earnings report. We’ve pointed out here that Nvidia stock tends to swing 7% in either direction the day after it reports. My colleague Laura Bratton has also noted that Nvidia’s earnings often surprise Wall Street.
According to tastylive founder and CEO Tom Sosnoff, volatility in the stock is low, even heading into earnings, suggesting that “the expectations are for something rangebound to happen.”
Sosnoff outlined several key points investors should keep in mind when determining whether to invest in a popular name like Nvidia:
Pros:
“It’s super liquid,” Sosnoff said on Wealth. “It’s got a very liquid derivatives marketplace. So you can do lots of different strategies and things like that.”
Sosnoff also pointed out that Nvidia remains a market leader. “It’s the bluest of all blue chips right now,” he said.
Cons:
A major con, according to Sosnoff, is that “it’s a crowded trade. Nvidia is pretty fully priced.”
He added that “for the first time, we’re not seeing any call skew in there, which means that the derivatives markets, which are pretty good at pricing upside expectations, are kind of mixed right now. They’re saying, ‘you know what, upside and downside, we have similar expectations.'”
“So I think the con is that if Nvidia misses, there’s pretty decent pot odds that the downside move could be greater than the upside move if they hit it,” he explained.