U.S. stocks are solidly in the green, flirting with all-time highs, amid enthusiasm of near-term rate cuts on the horizon after the Federal Reserve's meeting yesterday, where it left rates unchanged and opened the door for possible near-term adjustments. The markets are shrugging off a mixed bag of economic news that showed the Leading Index was flat and below estimates, jobless claims fell and a read on regional manufacturing tumbled. Treasury yields are lower, with the 10-year note dipping to levels not seen since 2016, and the U.S. dollar is falling, while crude oil prices are sharply higher amid increased geopolitical tensions after Iran shot down a U.S. drone, and gold is rallying. Stocks in Asia soared and European markets remain higher amid the global buoyancy following the Fed's decision, and after the Bank of Japan and the Bank of England also kept their respective rate policies unchanged.
At 11:00 a.m. ET, the Dow Jones Industrial Average, the S&P 500 Index and the NASDAQ Composite are up 0.7%. WTI crude oil is jumping $3.22 to $57.22 per barrel, Brent crude oil is trading $2.69 higher at $64.69 per barrel, and wholesale gasoline is up $0.06 at $1.80 per gallon. The Bloomberg gold spot price is rallying $22.87 to $1,383.25 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is falling 0.5% at 96.68. Natural Gas prices have traded in a range of $2.19-2.30 and were last seen trading lower by $0.078 (or - 3.43%) to $2.198/MMBtu, which represents a fresh 52-week low.
Source: Schwab Center for Financial Research
Today’s Bullish Activity
Gapping up to all-time highs this morning is Oracle Corp. (ORCL + $4.44 to $57.12) after the database giant reported fiscal Q4 earnings of $1.16 per share ($0.08 beat) on revenue that increased 1.1% year-over-year to $11.14B (above the $10.93B consensus estimate) as cloud services and license support business brought in $6.8B during the quarter. At least five brokerages bumped their price targets on ORCL following the results. Calls and puts are trading roughly even with the September 21st 57.50 put garnering the most attention from traders (volume is 13,843).
Multiple stocks are also trading to the upside on bullish analyst moves:
- Bloom Energy Corp. (BE + $0.49 to $12.66): Bank of America/Merrill Lynch upgraded the fuel cell maker to “Neutral” from “Underperform”. Calls are outnumbering puts roughly 3:2 with the August 16th 12.50 call being the most actively traded contract (volume is 120).
- Dell Technologies Inc. (DELL + $0.96 to $54.38): Deutsche Bank initiated coverage on the IT products and services provider with a “Buy” rating and a $62.00 price target. Calls are outpacing puts roughly 5:1 with the June 21st 55.00 call leading the way (volume is 326).
- Nordstrom Inc. (JWN + $0.39 to $33.56): Gordon Haskett upgraded the luxury retailer to “Hold” from “Reduce”, saying that the risk/reward is more balanced at current levels. Calls are outnumbering puts roughly 8:1 with the June 21st 33.00 call topping the most actives list (volume is 2,063). If you read yesterday’s blog you might recall that JWN was highlighted for unusual call activity on the 32.50 and 33.00 calls that expire tomorrow (June 21st).
New 52-week highs (300 new highs today): Adobe Systems Inc. (ADBE + $6.49 to $297.70), American Express Company (AXP + $0.39 to $125.07), Cummins Inc. (CMI + $1.81 to $169.76), Honeywell International Inc. (HON + $0.75 to $176.16)
Notable Call Activity
WTI Crude prices are up by nearly 6% this morning (on news that Iran shot down a U.S. drone in international waters) and some unusual near-term call activity (6:1 over puts) is being seen in the VanEck Vectors Oil Services ETF (OIH + $0.53 to $14.35) which is primarily being driven by activity on three contracts:
- June 28th 14.50 Call (volume is 17,160 vs. open interest of 17,006) – the activity mostly consisted of a 15.73K block that was bought at the ask price of $0.25.
- June 21st 14.50 Call (volume is 16,226 vs. open interest of 23,370) – the activity mostly consisted of a 10.00K block that was sold at the bid price of $0.11.
- July 12th 15.00 Call (volume is 10,633 vs. open interest of 29) – the activity mostly consisted of a 10.00K block that was bought at the ask price of $0.28.
It’s unclear whether the block that was bought on the June 28th 14.50 call is a new position (given the open interest figure) and it appears that a previously held long 10K position was rolled out (from the June 21st expiration to July 12th) and up (from the 14.50 to the 15.00 strike).
Shares of the VanEck Vectors Gold Miners ETF (GDX + $1.06 to $25.06) are trading at the highest levels since 2017 and the bulls appear to be taking notice. Calls are outpacing puts 8:1 as option traders primarily target the July 19th 25.00 call (volume is 35,810 vs. open interest of 45,291) and the December 20th 30.00 call (volume is 20,962 vs. open interest of 2,472). The activity on the July contract mostly consisted of various sized blocks that were being bought for between $0.63-0.70 and the volume on the December contract mostly consisted of a 20K block that was bought at the ask price of $0.52 (suggesting bullish intent).
Today’s Bearish Activity
Shares of Carnival Corp. (CCL - $5.23 to $47.61) are gapping down to a five-month low after the leisure travel company beat quarterly estimates but offered up cautious guidance earlier this morning. The company reported Q2 earnings of $0.66 per share on revenue of $4.84B (above the respective $0.61 and $4.49B consensus estimates) but guided Q3 EPS to a range of $2.50-2.54 (vs. the $2.68 expected) and lowered full-year 2019 EPS to a range of $4.25-4.35 (from a prior view of $4.35-4.55). Calls and puts are trading roughly even with the June 28th 47.00 call topping the most actives list (volume is 1,317).
Also trading to the downside is Darden Restaurants Inc. (DRI - $1.04 to $116.37) after the owner and operator of full-service restaurants reported fiscal Q45 earnings of $1.76 per share ($0.03 beat) on revenue that increased 4.5% year-over-year to $2.23B (below the $2.24B expected) as blended same-restaurant sales increased 2.5% year-over-year. The company issued downside guidance as fiscal-year 2020 EPS is expected to come in a range of $6.30-6.45 on revenue of ~$8.96-9.04B versus the respective $6.46 and $9.09B consensus estimates. Puts are outnumbering calls roughly 3:2 which is primarily being driven by activity on the June 21st 115.00 put (volume is 1,255).
Lastly, shares of Tesla Inc. (TSLA - $7.13 to $219.24) are under pressure after Goldman Sachs cut their price target to $158.00 (from $200.00) while maintaining their “Sell” rating on the stock. Goldman analyst David Tamberrino acknowledged that the electric car maker is experiencing a healthy demand environment during the second quarter, but he doesn’t believe that demand is sustainable. Shares of TSLA appear to be encountering technical resistance around the 50-day Simple Moving Average (SMA) over the past three days. Puts are slightly outnumbering calls with the July 19th with the July 19th 50.00 put seeing the most action from traders (volume is 10,179 vs. open interest of 8,386).
New 52-week lows (42 new lows today): Bank of New York Mellon Corp. (BK - $0.27 to $42.42), Flexsteel Industries Inc. (FLXS - $0.19 to $16.30), Kohl’s Corp. (KSS - $0.35 to $46.54), PetMed Express Inc. (PETS - $0.59 to $15.95)
Notable Put Activity
Some unusual put activity (~11:1 over calls) is being seen in Mattel Inc. (MAT - $0.09 to $11.32) which is primarily being driven by activity on the October 18th 12.00 put. Volume on this contract is 5,073 versus open interest of 1,295, so we know that this primarily represents new positioning. The bulk of the activity on this contract is being attributed to several blocks (3,400, 200, 133, 133, etc.) that were bought at the ask price of $1.70, which suggests bearish intent.
KKR & Co. Inc. (KKR + $0.23 to $24.52): Puts are outnumbering calls better than 5:1 which is mostly due to activity on the July 19th 24.00 put. Volume on this contract is 1,820 (vs. open interest of 495) which mostly consisted of various sized blocks that were being bought at various times at the ask price of $0.50, which suggests bearish intent.
VanEck Vectors J.P. Morgan EM Local Currency Bond ETF (EMLC + $0.24 to $34.53): Option volume is running at nearly 40x the daily average of 223 contracts which is primarily being driven by activity on the October 18th 35.00 call. Volume on this contract is 8,860 (vs. open interest of 14) which nearly entirely consisted of a 5,279 block that was bought for $0.35 when the bid ask spread was $0.00 x $0.50 and (separately) a 3,519 block that traded for $0.30. We know that 5,279 block is a new position and we can assume the intent is bullish in nature since the trade took place above the midpoint of the bid/ask spread.
Pure Storage Inc. (PSTG + $0.40 to $16.60): Option volume is running at roughly 18x the daily average of 616 contracts and the activity is definitively call-biased (20:1 over puts). The most actively traded contracts is the July 19th 17.50 call (volume is 10,432 vs. open interest of 1,212) which primarily consisted of various size blocks that were bought for between $0.45-0.50 (suggesting bullish intent).
The CBOE Volatility Index (VIX + 0.93 to 15.26) has been on both sides of the unchanged line today (intraday range is 13.19-16.03) and was last seen higher by ~6%, even though stocks are higher across the board around the mid-day mark today (DJI + 136, SPX + 15, COMPX + 35). VIX option volume has been above average today at 316,636 contracts (#8 on the top 10 most actives list) and the activity has been call-biased (the volume put/call ratio is 0.72). However, the most actively traded VIX contract is the August 21st 12.00 put as volume is 33,576 vs. open interest of 26,653.
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. You can also join our Schwab Live Daily webcast, “Today’s Options Market Recap” on Tuesdays and Wednesdays from 3:00-4:00 PM EST to hear about more unusual option activity and ask questions in real-time.