Traders expect Nvidia to see a huge move on earnings

Chip stocks are ripping in 2019, can Nvidia's earnings report keep the rally going?

Semiconductors are surging this year. The SMH ETF that tracks the space is up 17 percent in 2019, with a number of names in the group soaring double digits.

Nvidia finds itself right in the middle of the pack, rallying 15 percent after a brutal end to 2018 cut the stock in half. The company is scheduled to report earnings after the bell Thursday, and while Nvidia issued a warning last month, the options market is still expecting a big move for the chip stock, said's Dan Nathan.

"The implied movement is pretty big, and [Nvidia] has been an aggressive mover on earnings news over the last few months," Nathan said Wednesday on CNBC's "Fast Money." "If you think back to Nov. 15, the company reported a very disappointing result, the stock was down 20 percent. Then, just last month, Jan. 25, the company pre-announced a negative quarter and the stock was down 15 percent," he added.

Nathan noted that the current implied move for Nvidia stock is roughly 7 percent in either direction.

But what is an implied move, and how do you calculate it?

The implied move refers to the price of the at-the-money put plus the price of the at-the-money call, divided by the strike price. This can help give investors clues as to where the options market expects a particular stock to trade by a given date.

"If I know that [Nvidia] is reporting on Thursday after the close, I can look at the at-the-money straddle, the weekly options. When the stock was trading at $155, the weekly 155-call was offered at $5.50, the weekly 155-put was offered at $5.50. Together, that makes $11," Nathan said.

"Defining your risk with an at-the-money call or put, [whichever is] your directional bias into this print is the way to do it. You're risking basically $5.50 to make that directional bet on something that may have, sort of, a boomerang action if the news is as expected."

Nvidia was trading slightly higher Thursday.