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Today's Options Market Update for April 18, 2019

Stocks Mostly Higher Amid Flurry of Earnings & Data

U.S. stocks are tilting to the upside as a plethora of data, headlined by earnings results from Union Pacific and a jump in domestic retail sales, is being digested ahead of tomorrow's Good Friday holiday break. However, technology and healthcare issues are seeing some pressure with the latter continuing to be hampered by political uncertainty, though industrials are gaining ground. Treasury yields are lower despite the data, while the U.S. dollar is rising, crude oil prices are mixed and gold is ticking higher. Asia finished lower and Europe is mixed following some lackluster Eurozone business activity data.  

At 10:56 a.m. ET, the Dow Jones Industrial Average is up 0.2%, while the S&P 500 Index is dipping 0.1% and the NASDAQ Composite is declining 0.3%. WTI crude oil is decreasing $0.12 to $63.75 per barrel, though Brent crude oil is trading $0.17 higher at $71.79 per barrel and wholesale gasoline is up $0.02 at $2.06 per gallon. The Bloomberg gold spot price is gaining $1.14 to $1,275.15 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is rising 0.4% to 97.36. Natural Gas prices have traded in a relatively tight range of $2.49-2.52 and was last seen trading lower by $0.02 (or -0.79%) to $2.50/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Multiple stocks are moving higher this morning in reaction to quarterly earnings results:

  • Las Vegas Sands Corp. (LVS + $1.11 to $69.02): The casino operator reported Q1 earnings of $0.91 per share ($0.04 beat) on revenue of $3.65B (above the $3.48B expected). Macau adjusted property EBITDA increased 8.7% to $858M while the hotel, retail, convention and mass gaming segments for Marina Bay Sands in Singapore contributed to $423M of adjusted property EBITDA for the quarter. Shares of LVS are trading at an eight-month high following the results. Calls are outnumbering puts roughly 3:1 with the September 20th 67.50 call seeing the most action from traders (volume is 15,648).
  • Snap On Inc. (SNA + $13.87 to $171.71): The hand-tool maker reported Q1 earnings of $3.01 per share ($0.11 beat) on revenue of $921.7M (below the $933.13M expected). The company said it expects capital expenditures in 2019 will be in the range of $90-100M, of which $20.2M was incurred in the first quarter. Shares of SNA hit a six-month high of $174.00 earlier in the trading session. Puts are outnumbering calls roughly 5:4 with the April 18th 165.00 call being the most actively traded contract (volume is 378).  
  • Union Pacific Corp. (UNP + $7.18 to $176.46): The railroad operator reported Q1 earnings of $1.93 per share ($0.06 beat) on revenue of $5.38B (below the $5.51B expected). Business volumes, as measured by total revenue carloads, decreased 2% year-over-year. Shares of UNP are trading at a fresh 52-week high following the results. Calls are outnumbering puts roughly 4:3 with the April 18th 175.00 call being the most actively traded contract (volume is 8,522).  
  • United Rentals Inc. Inc. (URI + $10.94 to $136.70): The equipment rental company reported Q1 earnings of $3.31 per share ($0.27 beat) on revenue of $2.12B (above the $2.05B expected). Looking ahead, the company reaffirmed full-year 2019 revenue guidance of $9.15-9.55B (vs. the $9.3B consensus estimate), adjusted EBITDA of $4.35-4.55B and free cash flow of $1.3-1.5B. Today’s ~8% jump puts the stock above its 200-day Simple Moving Average (SMA) of $132.57. Calls are outnumbering calls better than 2:1 with the April 18th 135.00 call leading the way (volume is 764).

Note: A couple of IPO’s began trading today: Zoom Video Communications Inc. (ZM + $27.15 to $63.15) & Pinterest Inc. (PINS + $5.15 to $24.15).

New 52-week highs (74 new highs today): Ally Financial Inc. (ALLY + $0.01 to $29.68), Cress Inc. (CREE + $0.48 to $66.88), Intel Corp. (INTC + $1.92 to $58.63), Procter & Gamble Company (PG + $0.10 to $105.77), ULTA Beauty Inc. (ULTA + $0.91 to $355.9)

Notable Call Activity

Some unusual call activity (5:1 over puts) is being seen in Western Digital Corp. (WDC + $0.51 to $54.96) as option traders primarily target the October 18th 70.00 call. Volume on this contract is 8,757 (vs. open interest of 1,776) which mostly consisted of a 2,232 block that was bought at the ask price of $1.84 and (separately) a 2,200 block that was bought for $1.63 when the bid/ask spread was $1.43 x $1.82. We know these blocks are new positions based on the open interest figures and we can assume that the intent is bullish in nature since they were bought. Note: WDC is scheduled to report Q1 earnings on April 29th after the market close.

Today’s Bearish Activity 

Multiple stocks are trading lower following quarterly earnings results:

  • Atlassian Corp. PLC (TEAM - $11.88 to $99.31): The team collaboration software company reported fiscal Q3 earnings of $0.21 per share ($0.03 beat) on revenue of $309.3M (above the $304.68M expected). The company added 5,803 new customers during the quarter, with the total customer account equaling 144,038 at quarter-end. Looking ahead, Atlassian said Q4 EPS is expected to be $0.16 (below the $0.19 expected) on revenue of $329-331M (above the $327.58M consensus estimate). Today’s ~9% drop puts the stock below its 50-day SMA for the first time since December. Puts are outnumbering calls roughly 3:2 with the April 18th 100.00 put garnering the most attention from traders (volume is 2,057).
  • Alcoa Corp. (AA - $0.52 to $27.20): The alumina and aluminum producer reported a Q1 loss of $0.23 per share ($0.10 miss) on revenue of $2.73B (below the $2.87B expected). The company’s shipment outlook for Bauxite, Alumina and Aluminum remains unchanged from the prior full-year forecast. Alcoa expects full-year 2019 global aluminum demand growth to be +2-3% (down from a prior forecast of +3-4%), predominately due to lower demand growth in China. Puts are slightly outnumbering calls with the May 17th 30.00 call being the most actively traded contract (volume is 7,133).
  • Check Point Software Technologies Inc. (CHKP - $12.32 to $117.21): The network security provider reported Q1 earnings of $1.32 per share ($0.01 beat) on revenue of $471.83M (slightly above the $471.16M expected). In terms of guidance, the company said it expects Q2 adjusted earnings per share to come in a range of $1.32-1.40 on revenue of $474-500M versus the respective $1.38 and $487M consensus estimates. Shares of CHKP are trading at a two-month low following the results. Puts are outpacing calls better than 3:1 with the May 17th 120.00 put leading the way (volume is 2,783).
  • Sleep Number Corp. (SNBR - $8.30 to $39.73): The mattress maker reported Q1 earnings of $0.80 per share ($0.06 beat) on revenue of $426.45M (below the $427.53M expected). The company reaffirmed full-year 2019 EPS guidance of $2.25-2.75 on revenue of $1.62-1.68B versus the respective $2.47 and $1.64B consensus estimates. Shares of SNBR are trading at a two-month low following the results. Calls are outnumbering puts roughly 5:3 with the April 18th 42.00 call topping the most actives list (volume is 1,067).  

 

New 52-week lows (84 new lows today): Abiomed Inc. (ABMD - $9.89 to $256.06), Inogen Inc. (INGN - $2.09 to $80.18), Mednax Inc. (MD - $0.63 to $26.03)

Notable Put Activity

Some unusual put activity (~3:1 over calls) is being seen in Johnson & Johnson Inc. (JNJ - $1.57 to $136.95) which is primary being driven by activity on two contracts:

  • The April 18th 138.00 put (volume is 8,930 vs. open interest of 3,611) – The activity on this contract mostly consisted of various sized blocks that were bought at various prices, including a 2,470 block that was bought for $0.85 when the bid/ask spread was $0.61 x $0.92, which suggests bearish intent.
  • The January 2021 100.00 put (volume is 1,000 vs. open interest of 470) – All of the volume on this contract is being attributed to a 1K block that was bought for $2.95 when the bid/ask spread was $2.26 x $3.50. We know this block is a new position given the open interest figure and we can assume the intent is bearish in nature since the trade took place above the midpoint of the bid/ask spread.  

Shares of JNJ dropped below the 50-day SMA of $136.86 earlier in the session and are less than 1% above the 200-day SMA of $135.62.

For the second day in a row Eli Lilly & Co. (LLY - $1.44 to $115.06) is seeing some unusual put activity (nearly 4:1 over calls) as option traders primarily target two contracts which expire today – the 116.00 put (volume is 3,654 vs. open interest of 1,410) and the 115.00 put (volume is 3,378 vs. open interest of 13,615). Yesterday the May 17th 110.00 put was highlighted for unusual put activity (today’s volume is 1,921 vs. open interest of 3,039).  

Volume Signals     

A couple of large blocks were seen simultaneously trading on Deutsche Bank (DB - $0.14 to $8.79) earlier this morning:

  • A 15K block was bought on the July 19th 8.00 put for $0.49 when the bid/ask spread was $0.38 x $0.51 (open interest is 22,429)
  • A 15K block was sold on the July 19th 7.00 put for $0.21 (open interest is 42,364)

It’s difficult to be certain but based on the expiration date it’s likely that this is a $8.00/$7.00 bear put spread.  

Cabot Oil & Gas Corp. (COG - $0.64 to $26.40): Option volume is running at over 8x the daily average of 1,190 contracts and the activity is definitively call-biased (25:1 over puts). The most actively traded contract is the May 17th 29.00 call as volume is 4,212 versus open interest of 584. Contracts were exchanging hands for between $0.20 and $0.28 each, including a 2,505 block that traded for $0.25, directly in the middle of the $0.20 x $0.30 bid/ask spread (intent is unclear).   

Gauging Volatility

The CBOE Volatility Index (VIX - 0.28 to 12.32) has been on both sides of the unchanged line today (intraday range is 12.02-13.12) and has moved into negative territory at the time of this writing (1:02 PM ET) as equity markets are mixed the board around the mid-day mark today (DJI + 88, SPX + 3, COMPX - 7). VIX option volume has been below average today at 217,417 contracts (#6 on the top 10 most actives list) and the activity has been definitively call-biased (the volume put/call ratio is 0.20). The most actively traded contract is the May 22nd 19.00 call as volume is 22,222 versus open interest of 71,938.

Interested in receiving notifications of intraday unusual option trades? Follow Schwab’s Vice President of Trading & Derivatives Randy Frederick on Twitter @RandyAFrederick who will be tweeting unusual options trades as he sees them throughout the day.

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All corporate names and market data shown above are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security.
All references to subjects (securities, indexes, futures contracts, and options contracts) were derived based on screens conducted by the writer for certain anomalous activity such as volumes, volatility and other related market data. As needed for brevity, the writer may have applied discretion when choosing among screen outputs for inclusion. Such discretion may have been based on news reports or other considerations of public interest. The views or opinions are those of the writer, and are subject to change without notice. All referenced subjects were chosen for illustrative purposes only and should not be considered recommendations, offers to sell, or solicitations of offers to purchase. Past performance is no guarantee of future results.
Futures trading carries a high level of risk and is not suitable for all investors. Past performance is no guarantee of future results.

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