Today's Options Market Update

Stocks Mostly Flat On Mixed Economic Data

U.S. stocks are hovering around the flatline following a six-session upswing, in likely subdued volume ahead of a long holiday weekend. Mixed reads on Q1 GDP and durable goods orders are being eyed, though Costco Wholesale is headlining another dose of mostly upbeat retail earnings reports. Crude oil prices are ticking higher after yesterday's tumble on apparent disappointment following OPEC's highly-expected production cut extension. Treasury yields are mostly lower, while the U.S. dollar is ticking higher and gold is gaining solid ground. Asia finished mixed and European equities are mixed.

At 10:57 a.m. ET, the Dow Jones Industrial Average is dipping 0.1%, while the S&P 500 Index is little changed and the Nasdaq Composite is ticking 0.1% higher. WTI crude oil is increasing $0.10 at $49.00 per barrel, Brent crude oil is rising $0.02 at $51.48 per barrel, and wholesale gasoline is up $0.01 at $1.61 per gallon. The Bloomberg gold spot price is trading $11.54 higher at $1,267.21 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is up 0.2% at 97.44.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Ulta Beauty Inc. (ULTA + $12.51 to $305.55): The Bolingbrook IL based beauty retailer reported Q1 earnings of $1.91 per share ($0.11 beat) on revenue of $1.31B (above the $1.28B expected). Comparable same-store sales increased 14.3%. The company is projecting same store sales growth of 9% to 11% compared to the prior forecast of 8% to 10%. The ULTA 05/26/2017 300.00 C is garnering the most attention with 1070 contracts traded in early action. The overall Put/Call ratio (based on today’s volume) is unchanged at 0.97 with calls marginally outnumbering puts.

Nutanix Inc. (NTNX + $3.33 to $20.90): The “hyper-converged enterprise technology vendor reported a Q3 loss of ($0.43) which was better than the forecast ($0.48) on revenue of $191.80B (above the $186.6B expected). The company also forecasts a Q4 loss of (-$0.38 vs -$0.39) on revenue of $215 – $220 million (vs. $204.74 million Capital IQ estimate). Volume Put/Call ratio remains in the bullish range at 0.15 but much lower than open interest put/call ratio at 0.43. The NTNX 06/16/2017 22.50 C is attracting the most attention in early trading. 2,144 contracts have traded vs open interest of 2,736.

New 52-week highs (155 new highs today): Blackberry Ltd. (BBRY + $0.33 to $11.55), Boeing Co. (BA + $0.535 to $187.605), Boston Scientific Co. (BSX + $0.26 to $27.52)

Notable Call Activity

Nine out of ten of the most actively traded contracts on Micron Inc. (MU - $0.08 to $29.35) are calls. The MU 06/16/2017 31.00 C contract has traded 23,615 compared to open interest of 3,643 so we know that this primarily represents new positioning. There were 2 large blocks that traded today, one consisting of 17,990 contracts traded below the bid price at the time and a block of 2,162 contracts traded between the bid and ask price. A large number of the transactions occurred at or near the bid indicating bearish sentiment.

Today’s Bearish Activity

Gamestop Corp. (GME - $2.37 to $21.25): The video game retailer reported Q1 earnings of $0.58 per share ($0.01 beat). Revenue increased to $2.05B driven in part by strong growth from the international segment. Shares are down however as the company reiterated its full year earnings between $3.10 and $3.40 per share and comparable same-store sales growth of 0% to -5.0%. Volume Put/Call ratio has spiked to 2.42 vs. the open interest Put/Call ratio of 1.13. The GME 06/16/2017 22.00 P has 2,236 contracts transacted in early trading versus open interest of 2,619.

Zoes Kitchen Inc. (ZOES - $4.68 to $11.52): The restaurant chain company reported Q1 earnings of $0.01 per share (in-line with forecasts) on revenue of $90.6M (below the $92.6M expected). The company lowered revenue guidance for FY17 to $314 -$322M versus the $324.08M consensus. Comparable same-store sales growth is seen to be in the flat to negative 3% range compared to previous guidance of +1% to 2% growth. Puts are outnumbering calls 1.48 to 1 in early trading, a shift from open interest put/call ratio of 0.94. The most actively traded contract is the ZOES 06/16/2017 15.00 P with 908 contracts traded vs. open interest of 3,124.

Splunk Inc.  (SPLK - $5.23 to $61.86): The San Francisco-based software company reported a Q1 loss of $0.01 per share ($0.03 beat) on revenue of $242.2 million (above the $233.8M million expected). However, licensing revenue came in at 48% of total revenue which was lower than the expected 54% and this seems to be driving down the stock today. The SPLK 07/21/2017 70.00 C has seen a significant spike in activity with 4,026 contracts traded versus open interest of only 40 contracts. Volume put/call ratio is down slightly to 0.38 versus open interest put/call ratio of 0.53

New 52-week lows (94 new lows today): Alexion Pharmaceutical Inc. (ALXN - $2.00 to $96.50), Noble Energy Inc. (NBL - $0.40 to $29.33), Tripadvisor Inc. (TRIP - $1.50 to $38.32)

Notable Put Activity

Today’s ratio of puts to calls continues to be at interestingly high level in US Bancorp (USB - $0.13 to $51.64). The Put/Call Volume ratio is 30.29 and total option volume so far today is 4,662. The USB 06/02/2017 51.50 P is seeing the lion’s share of the activity as volume is 3,244 within the first 2 hours of trading.

Volume Signals

Omega Healthcare (OHI - $0.50 to $31.49) is seeing some unusual option activity this morning. Trading in the company’s options have been more than 17 times the full day average over the past 20 months. Three month implied volatility is currently 19.8%.Today there has been very sizeable positioning in the OHI 07/21/2017 30.00 P. Volume so far in this contract has been 5,845 compared to open interest of 1,148 so we know that we have new positioning here.

Gauging Volatility

The CBOE Volatility Index (VIX - 0.02 to 9.97) is flat today as equity markets are mostly flat as well to start this trading session. We have seen a large amount of volume in the VIX 08/16/2017 24.00 C so far today. This contract has volume of 12,308 within the first 45 minutes of trading. This is about 3 times as much as the next most actively traded contract on the day. The VIX has had numerous trading sessions over the last month where the index has bounced along the bottom of its range in the high 9 to low 10 point range.


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