Today's Options Market Update

Equity Markets Tick Slightly Higher Following Mixed Data.

U.S. stocks are trading nicely higher as investors are awaiting the House of Representatives' vote on health-care legislation that was expected to take place last night, but was postponed and is likely to occur today. Treasuries are mostly higher as the economic calendar delivered a mixed durable goods orders report and a lower-than-expected read on domestic manufacturing. The U.S. dollar and crude oil prices are flat, while gold is rising. In earnings news, Micron Technology is rallying after announcing its 2Q results. Overseas, Asia finished mostly higher and Europe is mostly lower with financial and energy issues leading the decline.

At 11:00 a.m. ET, the Dow Jones Industrial Average is increasing 0.3%, the S&P 500 Index is gaining 0.4%, and the Nasdaq Composite is advancing 0.7%. WTI crude oil is gaining $0.08 to $47.78 per barrel, Brent crude oil is increasing $0.06 to $50.72 per barrel, while wholesale gasoline is unchanged at $1.60 per gallon. The Bloomberg gold spot price is trading $2.93 higher at $1,248.14 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is flat at 99.74. 

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Shares of Micron Technology (MU +$3.4 to $29.87) are trading higher today following an upbeat earnings report. The company reported growing demand for its NAND and DRAM chips coupled with higher pricing for the last quarter. This trend is expected to persist into Q3 with the company projecting net income to come in a range of $1.43 to $1.57 per share compared to analysts forecast of $0.90. The volume Put/Call ratio is bullish at 0.28 compared to the open interest Put/Call ratio of 0.50. The most actively traded contract is the MU 03/24/2017 30.00 C with over 14,500 contracts traded relative to open interest of 4,731. This indicates new positioning at this expiring option.

Also gapping up today Western Digital Corp. (WDC +$4.19 to $81.10) after the company announced the successful repricing of €880 million of new euro denominated loans, saving the company an estimated $12 million in interest annually starting March 23, 2017. The restructuring would reduce the company’s total leverage ratio to less than 1.75:1.00. Over 3.4 million shares have traded in early market action representing more than 80% of average daily volume. The most actively traded contract is the WDC 04/21/2017 80.00 C with 1,388 contracts exchanging hands. The volume Put/Call ratio is bullish at 0.18 compared to open interest Put/Call ratio of 0.88.

New 52-week high on high volume

CCL      $59.12              +1.03%

HD        $150.15            +1.46%

HTGM  $13.25              +337.20%

CY        $14.76              +5.28%

Notable Call Activity

A block of 6000 call contracts was traded as part of what appears to be a collar as follow:

Sell 6000 TMUS 05/19/2017 65.00 C at $3.20 per contract

Buy 6000 TMUS 05/19/2017 55.00 P at $0.72 per contract

Assuming this is a collar, the objective of the strategy is to lock in a price range of $55 to a maximum of $65. The trader is financing the purchase of the put with the sale of the calls and bringing in a net income of $2.48 per share (excluding commissions) or a gross profit of $1,488,000 ($3.20 – 0.72 x 6000 x 100) excluding commissions, if the price of the stock is between the two strike prices at expiration.

Today’s Bearish Activity

Finish Line Inc. (FINL -$3.43 to $12.63) is gapping down today after the company reported Q4 earnings that fell short of expectations. The Q4 EPS came in at $0.50 which was $0.20 less than the forecasted $0.70. Comparable sales were slightly worse than expected reporting a decrease 4.5%. The company also issued FY18 EPS guidance of $1.12-1.23 falling short of street estimates of $1.44. Volume Put/Call ratio is bearish at 8.33 versus open interest Put/Call ratio of 0.70. The most actively traded contract is the FINL 04/21/2017 14.00 C with 164 contracts traded compared to open interest of only 1.

Shares of Gamestop Corp. (GME -$3.16 to $20.90) are down today following a disappointing earnings report after the market close yesterday. The video game retailer reported Q4 EPS of $2.38 per share, $0.09 better than analysts’ estimates, but revenues fell 13.6% to $3.05 Billion below the street forecast of $3.06 Billion. Additionally the company announced a plan to close up to 225 stores globally while also making efforts to diversify away from physical video games as more gamers shift to downloading games from the internet. The GME 04/21/2017 23.00C has traded over 1,371 contracts making it the most active contract. Volume Put/Call ratio is at 3.00 compared to open interest Put/Call ratio of 2.06.

New 52-week lows on high volume

JCP      $5.45                -0.91%

WIN      $5.50                -1.96%

Notable Put Activity

Shares of Tenet Healthcare (THC + $0.68 to $17.71) are up over 4% today as President Trump and fellow Republicans have proposed a healthcare bill to kick off their promise to repeal and replace Obamacare. The THC 04/21/2017 17.50 has garnered significant interest. Volume on the option so far is 6,596. Open interest for this contract prior was actually zero.

Volume Signals

Mylan (MYL - $0.43 to $41.18): Mylan’s option volume is nearly double its average option volume in light of recent company news. Total option volume so far in the first hour of trading is 33,447 while its average option volume has been 17,433.  Mylan is down today roughly 1% after Abbott Labs drastically cuts its stake in Mylan. Abbott has sold over 60% of its ownership in Mylan. The total value has been reported as roughly 1.7 billion worth in an unregistered stock trade through Morgan Stanley. The MYL 03/24/2017 43.00 P is garnering significant interest in its last day of trading.  Volume on the day is 11,901 within the first 45 minutes of trading. This nearly matches its open interest of 12,414. The MYL 03/31/2017 43.00 P is nearly matching its open interest as well. Volume so far on this contract is 12,030 and open interest is 12,124.

Gauging Volatility

The CBOE Volatility Index (VIX - 0.73 to 12.39) is down over 5 and a half percent in early morning trading. All 3 major indexes are is positive territory so far in early trading.  Call contracts have been dominating in early action. The 3 most heavily traded contracts today are all calls. The VIX 05/17/2017 12.00 C is showing Volume of 5,516 so far. The VIX 04/19/2017 11.50 C is following close behind with volume on the day of 3,579. The VIX 04/19/2017 20.00 C has a volume of 2,537 today.     

 

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