Today's Options Market Update
Equities Mostly Lower Following Mixed Earnings Reports.
Domestic stocks are mostly lower, with the U.S. economic calendar dormant to set the stage for earnings to take the spotlight. Dow component General Electric missed revenue forecasts and narrowed its earnings guidance, but technology issues are moving higher as Dow member Microsoft is rallying on its stronger-than-expected results. Global monetary policy and political uncertainty continue to fester. Treasuries are ticking higher and the U.S. dollar is gaining ground. Crude oil and gold are slightly higher. Asia finished mostly lower as an earthquake in Japan and typhoon in Hong Kong disrupted the markets, while European equities are dipping amid some mixed earnings reports.
At 10:57 a.m. ET, the Dow Jones Industrial Average is down 0.5% and the S&P 500 Index is declining 0.2%, while the NASDAQ Composite is ticking 0.1% higher. WTI crude oil is gaining $0.07 to $50.70 per barrel, Brent crude oil is advancing $0.29 to $51.67 per barrel, and wholesale gasoline is up $0.02 at $1.51 per gallon. Elsewhere, gold is gaining $0.59 to $1,266.35 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is rising 0.3% to 98.66.
Source: Schwab Center for Financial Research
Today’s Bullish Activity
Multiple stocks are moving higher after reporting quarterly earnings this morning:
Microsoft Corp. (MSFT + $2.50 to $59.76): reported Q1 earnings of $0.76 per share ($0.08 beat) on revenue of $22.33B (above the $21.69B estimate); stock hit an all-time high of $60.45 earlier in the morning; Calls are outnumbering puts 3:1 with the October 21st 60.00 call leading the pack (volume is 27,114 versus open interest of 110,682).
McDonald’s Corp. (MCD + $2.95 to $113.52): reported Q3 earnings of $1.62 per share ($0.14 beat) on revenue of $6.42B (above the $6.28B estimate); global comparable same-store sales increased 3.5%; Calls are outnumbering puts 3:2 with the most active contract being the October 21st 114.00 call (volume is 1,403 versus open interest of 3,917).
Paypal Holdings Inc. (PYPL + $2.92 to $43.01): reported in-line Q3 earnings of $0.35 per share on revenue of $2.67B (above the $2.65B estimate); guides Q4 EPS to a range of $0.40-0.42 on revenue of $2.92-2.99B (vs. the respective $0.42 and $2.97B estimates); Stock trading at an all-time high; Calls are outnumbering puts 4:1 with the October 21st 41.00 call leading the pack (volume is 9,100 versus open interest of 15,568).
New 52-week highs (63 new highs today): Domino’s Pizza (DPZ + $0.25 to $165.65),Godaddy Inc. (GDDY + $0.69 to $36.27), Time Warner Inc. (TWX + $6.44 to $89.43)
Notable Call Activity
Shares of Arcelor Mittal (MT + $0.23 to $6.76) are trading at a 52-week high this morning and the move appears to be attracting some bullish positioning. Calls are outnumbering puts 10:1 with most of the attention going toward the December 16th 7.00 call. Volume on this contract is currently 25,245 (vs. open interest of 3,980) which included a 17.5K block that was bought at the ask price of $0.28, suggesting bullish intent.
Today’s Bearish Activity
Here are some noteworthy stocks trading lower after reporting earnings:
Athena Health Inc. (ATHN - $6.26 to $113.19): reported Q3 earnings of $0.60 per share ($0.13 beat) on revenue of $276.67M (below the $280.17M estimate); stock hit a 52-week low of $110.00 earlier in the morning; Puts are outnumbering calls 2:1 with the October 21st 107.00 put getting the most attention from traders (volume is 642 versus open interest of 61).
Skechers U.S.A. Inc. (SKX - $4.02 to $18.92): reported Q3 earnings of $0.42 per share ($0.04 miss) on revenue of $942.42M (below the $954.4M estimate); company guides Q4 revenue to a range of $710-735M vs. the $799.99M estimate; Puts are outnumbering calls 2:1 with the October 21st 24.00 put getting the most attention from traders (volume is 1,668 versus open interest of 2,643).
General Electric Co. (GE - $0.42 to $28.65): reported Q3 earnings of $0.32 per share ($0.02 beat) on revenue of $29.27B (below the $29.68B estimate); narrows full-year EPS to a range of $1.48-1.52 (from, $1.45-1.55) versus consensus estimate of $1.49; Stock hit an eight-month low of $28.33 earlier in the morning; Puts are outnumbering calls nearly 3:1 with the October 21st 29.00 put leading the pack (volume is 15,676 versus open interest of 129,765).
New 52-week lows (52 new lows today): Clorox Company (CLX - $0.11 to $119.60),Life Storage (LSI - $0.10 to $83.76),Realogy Holdings Corp. (RLGY - $0.10 to $24.36)
Notable Put Activity
Some unusual put activity (15:1 over calls) is being seen in the VanEck Vectors Semiconductor ETF (SMH - $0.26 to $67.73) which is primarily due to two large blocks that were bought out on the November 18th expiration. A 10K block was bought on the 62.00 put for $0.30 and (separately) a 5,500 block was bought on the 64.00 put for $0.50. Since volume is well above open interest on both of these contracts we know that these are new positions.
PowerShares US Dollar Bullish ETF (UUP + $0.11 to $25.52): Total options volume is 74,796 versus average daily volume of 4,201 which is primarily being driven by activity on the December 16th 25.00 put. Volume on this contract is 59,595 versus open interest of 3,954 which means we have new positioning here. Most of the volume on this contract came from one large block (53.88K) which was bought at the ask price of $0.13 which suggests bearish intent.
Energy Transfer Partners LP (ETP - $0.51 to $35.94): Option volume is running at roughly 25 times the daily average and the activity is certainly call-biased (30:1 over puts). The bulk of the volume is centered on two contracts out on the June 16th expiration as volume on the 45.00 call is 14,361 (vs. open interest of 2,866) and 14,261 on the 50.00 call (vs. open interest of 3,505). It appears that multiple bull call spreads were established on these two contracts. One of the largest transactions was a 7,500 block which was bought for $0.85 on the 45.00 call and another block of the same size which was sold on the 50.00 call for $0.33 per contract.
The CBOE Volatility Index (VIX – 0.06 to 13.69) is trading lower for the fourth day in a row and dropping below its 50-day SMA of 13.83 this morning. Options volume has been above average at 311,589 contracts (currently #5 on the most actives list) with most of the volume going toward the November 16th 23.00 call (volume is 51,847 versus open interest of 85,378).
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