Nvidia (NVDA) is set to report its first-quarter earnings after hours on Wednesday and expectations of a blockbuster report are running high. Options trading activity suggests investors are positioning for potential volatility, while the stock's short exposure is still the largest in SPX.

Word on the Street: Analysts on average expect Nvidia to post Q1 EPS of $1.77 and revenue of $78.97B. HSBC analysts have projected "another 'beat and raise' quarter," with the continuous ramp of GB300 driving revenue growth and robust AI GPU demand. Earnings beats aren't new for Nvidia, as demand for its GPUs has been "insane," according to CEO Jensen Huang. Over the past 12 quarters, there have been only three occasions when the company failed to beat revenue estimates by more than $1B. Besides AI strength, any updates on shareholder returns will be closely watched. "Backed by sizeable cash position and free cash flow, it is reasonable to expect a potential new share repurchase program during the call," GF Securities analyst Jeff Pu noted.

Market activity: S3 Partners noted that Nvidia remains the largest single-name short exposure in the SPX by notional value at roughly $62.5B. Much of the positioning likely reflects hedging activity rather than outright bearish bets. The options market is pricing in an implied post-earnings move of roughly 5% in either direction, according to S3, which translates into a potential one-day mark-to-market swing of about $3.5B for short sellers. Market observers detected signs of renewed interest in upside exposure, with Susquehanna highlighting a buyer of 25K June 245/260 call spreads, setting up a potential 7.4:1 payout on a move to $260 or higher. Nvidia's Earnings Could Pop The Options Bubble

SA commentary: "Investors' focus will likely shift towards visibility into the durability of Nvidia's long-term growth profile, rather than a simple beat-and-raise," SA analyst Summit Research noted. "Nvidia remains well-positioned to capitalize further on three underappreciated levers – prospective China H200 monetization, the upcoming Vera Rubin ramp, and its growing networking revenue share." Deep Value Investing also said China guidance is one of the main factors to monitor. "In my view, the fuel behind the rally (and therefore the breakout beyond the infamous $200 level) is the expectation that the company may resume GPU sales to this region during Q2. Just remember the mid-single-digit pop in Nvidia's stock after reports that the U.S. cleared H200 sales to 10 Chinese companies."