U.S. stocks are higher in midday action, but an empty economic calendar and caution ahead of tomorrow’s conclusion to the Fed’s monetary policy meeting, as well as an approaching potential government shutdown are keeping gains in check. Treasury yields are higher, as are crude oil prices and the U.S. dollar, while gold is lower. Oracle’s better-than-expected earnings are being overshadowed by its guidance, keeping a lid on the technology sector, while Blackberry announced a strategic partnership with Dow member Microsoft. Asia finished mixed and Europe is diverging.
At 10:52 a.m. ET, the Dow Jones Industrial Average is up 0.6%, the S&P 500 Index is 0.2% higher and the NASDAQ Composite is rising 0.3%.WTI crude oil is $1.39 higher at $63.50 per barrel, Brent crude oil is gaining $1.34 to $67.38 per barrel, and wholesale gasoline is adding $0.05 to $1.97 per gallon. The Bloomberg gold spot price is down $8.38 at $1,308.79 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is 0.6% higher at 90.28. Natural Gas has traded in a relatively tight range of $2.65-2.674 today and was last seen trading higher by $0.013 (or +0.49%) to $2.664/MMBtu.
Source: Schwab Center for Financial Research
Today’s Bullish Activity
Shares of Arena Pharmaceuticals Inc. (ARNA + $9.62 to $40.51) after the drug developer reported positive results from a mid-stage study of its experimental bowel disease drug (etrasimod). The company said that a higher dose of etrasimod improved symptoms in patients with ulcerative colitis and intends to move the drug to late-stage trials based on the data. Cantor Fitzgerald raised their price target to $64 from $45 while Leerink raised their price target to $63 from $56 following the results. Today’s ~30% jump basically gets the stock back to where it was before it reported (disappointing) Q4 results last Tuesday. Calls are outnumbering puts roughly 2:1 which is being driven by activity on the April 20th 40.00 call getting the most attention from traders (volume is 1,544 vs. open interest of 1,353).
Also trading to the upside is Blackberry Limited (BB + $0.52 to $13.24) following news that the security software and services company is partnering with Microsoft Corp. (MSFT + $0.35 to $93.24) to provide security for flagship Office applications that are used by businesses. As part of the deal, Blackberry’s Enterprise Bridge platform will allow businesses to securely access Microsoft’s applications, such as Excel or Word, on smartphone devices. Earlier in the morning the stock hit a seven-week high of $13.38. Call volume is dominating (7:1 over puts) with the March 23rd 13.00 call getting the most attention from traders (volume is 2,579 vs. open interest of 2,999).
New 52-week highs (55 new highs today): Adobe Systems Inc. (ADBE + $8.02 to $230.20), Proto Labs Inc. (PRLB + $1.30 to $124.80), Square Inc. (SQ + $2.28 to $56.86), Wex Inc. (WEX - $0.04 to $159.37)
Notable Call Activity
Some unusual call activity (11:1 over puts) is being seen in Albemarle Corp. (ALB - $2.19 to $94.72) which is primarily being driven by activity on the April 20th 100.00 call. Volume on this contract is 4,312 versus open interest of 1,171, so we know that this primarily represents new positioning. The activity on this contract mostly consisted of two large blocks (1,652 & 1,173) that were bought at the ask price of $1.80, which suggests bullish intent.
First Solar Inc. (FSLR + $1.00 to $72.26) is also seeing some heavy call activity (7:1 over puts) which is mostly due to activity on the 73.50 call which expires at the end of this week (March 23rd). Volume on this contract is 3,956 (vs. open interest of 1,134) which included a 2,997 block that was bought for $0.45 (suggesting bullish intent).
Today’s Bearish Activity
Moving lower this morning is Oracle Corporation (ORCL - $4.44 to $47.51) after the software company reported fiscal Q3 earnings of $0.83 per share on revenue of $9.78B which was better than the respective $0.72 and $9.77B consensus estimates. This morning’s sell-off appears to be due to softer-than-expected cloud business revenue growth which increased 31.7% year-over-year to $1.57B (below analyst’s $1.59B estimate). Stifel analyst Brad Reback called the results “lackluster” compared to stronger reports from peers and downgraded the stock to “Hold” from “Buy”. Puts are outnumbering calls 5:4 which is being driven by activity on the April 20th 45.00 put getting the most attention from traders (volume is 31,630 vs. open interest of 2,075).
Also trading to the downside is Children’s Place Inc. (PLCE - $13.40 to $125.55) after the retailer reported mixed quarterly results and disappointing guidance earlier this morning. The company reported Q4 earnings of $2.52 per share on revenue of $570.0M (vs. the respective $2.49 and $572.0M consensus estimates) and guided Q1 EPS to a range of $2.12-2.22 on “low single digit” comparable same-store sales growth (versus the respective $2.44 and 3.0% consensus estimates). In addition, the company’s Board of Directors approved a new $250M share repurchase program and increased their quarterly dividend 25% to $0.50 per share. Puts are outpacing calls nearly 4:1 with the April 20th 130.00 put getting the most attention from traders (volume is 616 vs. open interest of 627).
New 52-week lows (59 new lows today): British American Tobacco Industries (BTI - $0.97 to $64.68), CVS Corp. (CVS - $1.01 to $62.62), Hasbro Inc. (HAS - $0.84 to $85.61)
Notable Put Activity
Some unusual put activity (5:1 over calls) is being seen in Realty Income Corp. (O - $0.53 to $50.37) which is primarily being driven by activity on the June 15th 50.00 put (volume is 4,603 vs. open interest of 2,237) and the June 15th 47.50 put (volume is 2,164 vs. open interest of 2,409). The stock appears to be encountering some technical resistance around its 50-day SMA ($51.21) over the past six days as it has traded above it on an intraday basis on each of those six days, but was only able to close above it once (last Friday).
Reliance Steel & Aluminum Co. (RS - $0.43 to $88.46): option volume is running at over 12x the daily average of 393 contracts which is primarily being driven by a 5K block that was bought on the April 20th 90.00 call (open interest is 30) at the ask price of $2.55. We know this block is a new position given the open interest data and since it was bought at the ask price we can assume the intent is bullish in nature.
Dell Technologies Inc. (DVMT + $0.55 to $78.52): option volume is running at roughly 3x the daily average which is primarily being driven by some spread activity on the October 19th expiration:
A 2K block traded on the 90.00 call for $5.20 when the bid/ask spread was $3.90 x $6.60 (open interest is 4,382)
A 2K block traded on the 75.00 put for $7.15 when the bid/ask spread was $6.50 x $8.90 (open interest is 4,335)
A 2K block traded on the 60.00 put for $2.00 when the bid/ask spread was $0.30 x $3.00 (open interest is 4,775)
We don’t know whether this was an opening or closing spread position because of the open interest data.
The CBOE Volatility Index (VIX - 0.45 to 18.57) is giving back some ground as equity markets recover from yesterday’s sell-off. Yesterday the VIX hit an intraday high of 21.87 which was the highest level since March 2nd. VIX options volume has been slightly above average at 425,963 contracts (#4 on the most actives list) and the activity has been call-biased (nearly 3:2 over puts). The most actively traded contract is the March 21st 17.00 put as volume is currently 47,817 versus open interest of 288,445.
Shares of Facebook (FB - $10.15 to $162.41) are under pressure for the second day in a row on heavy volume and the stock is trading at the lowest levels since September of last year. Yesterday the stock got hit on reports of alleged misuse of information on more than 50M Facebook users and today the FTC announced that it is launching an investigation into the matter. Option markets are pricing in higher expected future volatility as the current average implied volatility of 36% compares to yesterday’s 30% and last Friday’s 22% closing levels. Option volume is heavy for the second day in a row and slightly call-biased, but the April 20th 115.00 put is the most actively traded contract (volume is 29,451 vs. 14,705). Note: the average implied volatility represents an estimated value for a 30-day implied volatility at the current underlying price, based on a curve fit of option implied volatilities.
Also seeing an uptick in implied volatility is Mulesoft Inc. (MULE + $7.06 to $40.09) which is trading higher following reports that Salesforce.com (CRM + $0.02 to $125.00) is in advanced talks to buy the company. Average implied volatility is up to 50% from yesterday’s 46% closing level and option volume is heating up (9x the daily average at the time of this writing). The most actively traded contact is the April 20th 40.00 call (volume is 1,340 vs. open interest of 109) as contracts were exchanging hands for between $0.25 and $4.00 each.
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