Today's Options Market Update

Equities Move Up on Healthcare Rally

U.S. equities are holding minor gains as market participants are closely watching the price of crude oil, which is currently higher, after it entered bear market territory recently. Treasuries are ticking slightly higher following economic data that showed a miss for weekly jobless claims, leading indicators matched expectations and regional manufacturing activity was better than expected. Gold is higher and the U.S. dollar is flat. Overseas, traders in Europe and Asia continue to watch the price of crude for possible evidence of declining global demand growth.  

At 10:52 a.m. ET, the Dow Jones Industrial Average, the S&P 500 Index and the Nasdaq Composite are advancing 0.1%. WTI crude oil is up $0.60 p to $43.13 per barrel and Brent crude oil is ticking $0.76 higher to $45.58 per barrel. The Bloomberg gold spot price is trading $3.50 higher at $1,249.98 per ounce. Elsewhere, the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is nearly unchanged at 97.52.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

One of today’s top gainers is Oracle (ORCL $51) +$5.37 (+11.6%) after announcing fiscal Q4 EPS of $0.89 versus the $0.78 consensus estimate, and revenues that were +2.8% y/o/y to $10.9B versus an estimate of $10.5B. CEO, Mark Hurd said the company is experiencing rapid adoption of the Oracle Cloud and is expecting EPS growth to accelerate in fiscal 2018. Equity volume was already equal to an average full day’s volume after only one hour of trading and options activity was extremely high (#3 on the top 10 most actives list) with more than 217k contracts traded in the first 2 hours. However, the volume put/call ratio of .60 is just slightly more bullish than the open interest put/call ratio of .68, with 7 of the top 10 most active contracts being calls with expirations in the 3 front months.

Also spiking higher is Novartis (NVS $85) +$2.70 (+3.2%) after the Swiss pharmaceutical company announced that the phase 3 Cantos study of its ACZ885 cardiovascular drug met its primary endpoint of reducing risk of future cardiovascular events in people with prior heart attacks. Equity volume was very close to an average full day’s volume after one hour of trading but options activity was rather light with only a few hundred contracts trading in aggregate. However, the volume put/call ratio of .15 is much more bullish than the open interest put/call ratio of .60, and 7 of the top 10 most active contracts are calls.

New 52-week highs on high volume

ORCL   $50.81             +9.7%  

NVS      $85.96             +4.1%

CELG   $133.87            +0.8%

IBB       $319.32            +1.1%

Notable Call Activity

A large block trade of 37k contracts was executed this morning on the iShares FTSE China 25 ETF (FXI $39) involving the 06/23/2017 40 calls at the bid price of $0.07. Since the open interest on this contract exceeds 42k contacts and it expires in 2 days, it is likely that this was a closing transaction.

A very large block trade of 50k contracts was executed on the AMEX exchange this morning on Bank of America (BAC $23) involving the 06/30/2017 24 calls at the ask price of $0.07. Since the open interest on this contract exceeds 107k contacts and it expires in 9 days, it is likely that this was a closing transaction. Shares of BAC are little changed since the beginning of 2017.

Today’s Bearish Activity

One of the biggest decliners of the day is Weibo (WB $69) -$7.15 (-9.3%) after the Chinese software and internet company was ordered by China’s film and TV authority to shut down video and audio streams that violated state rules, due to lack of proper certification. WB is 46% owned by Sina Corp (SINA $84) -$7.18 (-7.5%) and 8% owned by Alibaba Group (BABA $140) -$2.38 (-1.1%), both of which also appear to be impacted by the news. Equity volume on WB was very close to a full day’s volume after the first hour of trading but the volume put/call ratio of .77 is slightly more bullish than the open interest put/call ratio of .88. Seven of the top 10 most active contracts were calls expiring in June and July.

Another big loser of the day is Accenture Plc (ACN $123) -$6.44 (-5.1%) after it reported fiscal Q3 EPS of $1.52 ex-items, compared to the $1.52 estimate, and revenues that were +5.0% y/o/y in U.S. dollars and +7.0% in local currency to $8.9B. These results include the impact of a $510M charge from the termination of its U.S. pension plan. Equity volume was moderately higher than average and the volume put/call ratio of 1.29 is pretty close to the open interest put/call ratio of 1.26, but all of the top 10 most active contracts were puts.

New 52-week lows on high volume

LABD   $6.52                -2.3%

HAIN    $32.26              -2.7%

TJX       $68.71              -1.0%

Notable Put Activity

A large ratio spread was executed this morning on the PHLX exchange involving the iShares High Yield Corp Bond ETF (HYG $87) as follows:

30,000 07/21/2017 85.50 puts @ $0.28

15,000 07/21/2017 87.50 puts @ $0.80

Unfortunately since both legs of this spread were done at the bid price, it is impossible to determine which side was bought and which side was sold. However, since the open interest is very small on both contracts, we do know that these represent new positions. 

Two large block trades executed at the PCX exchange today on Urban Outfitters (URBN $17.30) as follows:

Sell 10,500 07/21/2017 16 puts @ $0.25

Sell 24,500 07/21/2017 16 puts @ $0.20

Since these were stand-alone trades and the open interest is only 119, we know that these were opening transactions and since they were executed at the bid price, they suggest bullish intent. Shares of URBN have fallen about 56% since November 2016.

Volume Signals

After 3 hours of trading, the list of notable equity block trades includes the following:

4.1M shares of IWF       @ 120.40

2.0M shares of XLF       @ 23.97

3.3M shares of BVN      @ 11.53

With over 28k contracts traded, option volume on American Airlines (AAL $49) is about 4x normal today, probably due to a news report that Qatar Airways has expressed interest in take a 10% stake worth approximately $808M. 8 of the top 10 most active contracts were calls.

With over 43k contracts traded, option volume on Canadian Solar (CSIQ $15) is about 7x normal today. The only news story today is that Export Development of Canada has committed $72M in financing for CSIQ’s participation in Dubai’s massive Solar City project. All 10 of the most active contracts trading on CSIQ were calls today.

Gauging Volatility

In late-morning activity, the CBOE Volatility Index ($VIX 10.54) is down about a quarter point. Total VIX options volume is relatively light at just 131k contracts, and the VIX is number 9 on the top 10 most actively traded names. At .43, the volume put/call ratio is a more bullish for equities than the open interest put/call ratio of .24.

After opening moderately lower, the S&P 500 Index($SPX 2438) is up about 4 points in late-morning activity. SPX option volume is only 280k contracts but it #2 among the most active names. At 2.19, the volume put/call ratio is just slightly more bearish than the open interest put/call ratio of 2.03.        

 

   Was this helpful?  

Subscribe:

Subscribe to Emails Subscribe via RSS

Important Disclosures