Today's Options Market Update
Stocks Sluggish to Close Out the Week
Major indexes turned mostly lower early, backtracking from Thursday's wide rally as Treasury yields ticked higher. The yield rise came after the Bank of Japan raised rates, an expected move that lifted borrowing costs there to a 31-year high. The central bank hinted at more hikes ahead.
Today is "triple witching" day, when options and futures expire for various traded products, possibly fueling increased trading activity and volatility. Volatility could accelerate again next week as more position shifting takes place before the end of the quarter in what's traditionally called "window dressing" season. That said, the Cboe Volatility Index (VIX) declined yesterday following the Federal Reserve's rate hike, which removed some uncertainty. Several Fed speakers are on tap today and next week, possibly shedding light on the decision.
Major indexes climbed yesterday for the second time in nine sessions as oil and yields retreated. The S&P 500 Index is down less than 1% week to date and less than 1% so far in September. The tech-heavy Nasdaq-100® (NDX) is up this week. "From a bullish perspective, while oil prices have pushed back higher over the past six weeks, the consumer remains resilient, and bond yields are higher but not 'running away,'" said Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research (SCFR)."
Source: Schwab Center for Financial Research
Morning Rush
The 10-year U.S. Treasury yield (TNX) is higher by ~6 basis points to 5.00%.
The U.S. Dollar Index ($DXY) is higher by 0.05 at 100.29.
WTI Crude Oil (/CL) September futures are lower by 1.10% to $96.16/barrel.
Gold prices have traded in a range of $4,372.20-4,439.80 and were last seen trading higher by ~0.43% to $4,418.40/oz.
Natural Gas prices for September futures have traded in a range of $2.85-2.94 today and were last seen trading higher by 0.10% to $2.90.
Bitcoin (BTC) is higher by ~5.93% over the last 24 hours to $80,912.67 today.
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Today's Bullish Activity
Moving higher this morning is Arm Holdings Plc Sponsored ADR (ARM + $1.62 to $266.52) after the British semiconductor and software design company's CEO told CNBC that he's more confident that ARM's new AI chip can meet a $2 billion revenue goal. Calls are outnumbering puts ~3:1 with the September 18th 275.00 call being the highest volume contract (volume is 1,393).
Also trading to the upside this morning is StubHub Holding Inc. (STUB + $0.20 to $6.14) after Citigroup upgraded the sports and entertainment ticket vendor to "Buy" from "Neutral." The analyst cited a sequential increase in app downloads in fiscal Q3 and sees an upside to adjusted operating earnings. Calls are outnumbering puts ~5:1 with the September 18th 6.00 call being the highest volume contract (volume is 222).
New 52-week highs (29 new highs today): Dell Technologies (DELL - $4.62 to $583.78), Marathon Petroleum (MPC + $2.05 to $424.00), Phillips 66 (PSX + $0.25 to $274.46)
Notable Call Activity
Some unusual call activity (~100:1 calls over puts) is being seen in Edgewise Therapeutics Inc (EWTX - $1.34 to $45.60) as option traders primarily target the October 16th 50.00 call. Volume on this contract is 3,083 (vs. open interest of 227), which included a 2,000 contract block that was bought for $2.15. We know that most of this block is a new position based on the open interest figure and we can assume that the intent is bullish in nature.
Today's Bearish Activity
Shares of Netflix Inc. (NFLX - $2.82 to $72.49) are under pressure this morning after the streaming giant was downgraded to "Underweight" from "Equal Weight" at Wells Fargo, and the price target was significantly cut to $57.00 from $80.00. Wells Fargo analyst Steven Cahall cited concerns that the company's engagement trends look worrying. Calls are slightly outnumbering puts with the September 18th 72.00 call being the highest volume contract (volume is 19,168).
Also trading to the downside this morning is Xenon Pharmaceuticals Inc. (XENE - $13.46 to $31.40) after the biotech company announced that it was pausing enrollment of new patients in studies for its major depressive and bipolar depression treatment after observing neuropsychiatric adverse events. Calls are moderately outnumbering puts with the October 16th 45.00 call the highest volume contract (volume is 67).
New 52-week lows (130 new lows today): Agree Realty Corp. (ADC + $0.13 to $68.28), AutoZone Inc. (AZO - $4.24 to $2,840.07), Lowe's Companies Inc. (LOW - $1.06 to $193.13)
Notable Put Activity
Some unusual put activity (~100:1 puts over calls) is being seen in Lamb Weston Holdings Inc. (LW + $0.06 to $46.52) which is primarily being driven by two large blocks (11,300 and 2,830) that were sold around the same time between $0.20 and $0.25, respectively, on the October 16th 37.50 put. Volume on this contract is 14,135 versus open interest is 240, so we know that these blocks represent new positioning, and we can assume that the intent is neutral to bullish.
Volume Signals
Nomad Foods Ltd. (NOMD + $0.05 to $10.79): Option volume is running at ~225x the daily average on this frozen foods company which is primarily being driven by activity on the October 16th 10.00 call. Volume on this contract is 1,500 versus open interest of 1, so we know we have fresh positioning. The bulk of the volume consisted of a 1,500 block that was sold for $0.71, which suggests neutral to bearish intent.
Hallador Energy Co. (HNRG - $0.14 to $15.03): Option volume is running at ~30x the daily average on this independent power producer as option traders primarily target the January 15th 2027 15.00 call. Volume on this contract is 1,000 versus open interest of 299, so it's likely that most of this volume represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought around the same time for between $2.35-2.37 each, which suggests bullish intent.
GDS Holdings Ltd. (GDS + $1.04 to $32.34): Option volume is running at ~15x the daily average on this data center and IT services provider which is primarily being driven by activity on the October 16th 34.00 call. Volume on this contract is 2,134 versus open interest of 468, so we know that most of the volume represents fresh positioning. The bulk of the volume consisted of a 1,980 block that was bought for $1.25, which suggests bullish intent.
Gauging Volatility
The Cboe Volatility Index (VIX - 0.01 to 15.43) has been on both sides of the unchanged line today (the intraday range is 14.99-15.63), as equity markets are lower around the midday mark (DJI - 200, SPX - 16, $COMP - 35, RUT - 26). VIX option volume has been below average today at 223,576 contracts, and calls are outpacing puts roughly 3:1 so far today.
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