Rigetti Computing, Inc. saw its shares rise by 9.8% to $39.6 in the last trading session, with a higher trading volume. Over the past four weeks, the company’s stock has increased by 14%. This surge in share price follows news that the U.S. government may consider investing in top quantum firms to boost national competitiveness.

Such support could lead to partnerships and improved funding prospects for Rigetti, one of the few quantum computing companies publicly traded. The company is projected to report a quarterly loss of $0.05 per share, marking a 37.5% year-over-year improvement. Expected revenues are $2.39 million, a 0.4% increase from last year.

Trends in earnings estimate revisions correlate with near-term stock price movements, yet Rigetti’s consensus EPS estimate hasn’t changed in the last 30 days. Monitoring these estimates can be pivotal in understanding future stock strength. In the same industry, Phunware has seen its stock rise by 3.8%, despite a 7.4% decrease over the past month. Its consensus EPS estimate for the upcoming report has improved by 2.1% in the last month, showing a 44% change from the previous year. Phunware holds a Zacks Rank of #3 (Hold).

Given RGTI’s recent 9.8% jump to $39.60, we are seeing a significant increase in implied volatility, making option premiums more expensive. This surge is driven entirely by speculation around potential U.S. government investment, not by the company’s underlying financial health. Traders should be prepared for sharp price movements in either direction as this story develops.

For those with a bullish outlook, buying call options is a direct bet that the government investment rumors will become reality. We saw a similar dynamic back in early 2024 when government AI initiatives boosted related stocks, and the National Quantum Initiative Act has already allocated over $3 billion to the sector since its inception. A confirmed equity stake would likely send the stock much higher, making out-of-the-money calls a high-risk, high-reward play.

Conversely, the unchanged earnings estimates and projected revenue growth of just 0.4% present a strong case for a pullback. We’ve observed in the past that stocks fueled by hype without fundamental support often retrace their gains once the excitement fades. Purchasing put options would be a wager that the weak upcoming earnings report will overshadow the news, bringing the stock price back down to earth.

Considering the high implied volatility and the binary nature of the catalyst, a long straddle or strangle could be an effective strategy. By buying both a call and a put option, a trader is betting on a significant price swing, regardless of the direction. This approach profits if the stock makes a decisive move post-earnings or upon a formal government announcement, breaking out of its current range.

Timing is critical, and any positions should be structured around the upcoming earnings release. We would look at options expiring in late November or December 2025 to allow enough time for the market to react to both the financial results and any further news on government partnerships. This window captures the key potential catalysts for the stock.

In contrast, a company like Phunware (PHUN) from the same industry shows a different profile, with its earnings estimates having been revised upward by 2.1% recently. This suggests that while RGTI offers a speculative, news-driven volatility play, other stocks in the sector may present opportunities based on improving financial expectations. This highlights the current speculative premium being placed specifically on RGTI.