Today's Options Market Update

To quote a famous politician, stocks don't have Treasury yields to kick them around. It's Columbus Day— Indigenous Peoples' Day in several states—so fixed income trading is closed, possibly meaning thin volume and less direction for participants who've spent months scrutinizing rising yields. Major indexes stayed flat early Monday even as oil prices rose after a weekend featuring more violence in the Middle East and Russian attacks on Ukraine's energy infrastructure.

Turning to the calendar, this week's highlight could be Consumer Price Index (CPI) data due Wednesday. Earnings season picks up, with multiple big banks reporting, including JPMorgan Chase (JPM) and Goldman Sachs (GS) on Tuesday and Bank of America (BAC) and Morgan Stanley (MS) on Wednesday. AI and tech-related earnings include Taiwan Semiconductor Manufacturing (TSM) and ASML (ASML).

The S&P 500 Index and Nasdaq rose Friday to close modestly higher for the week. Software gained and chips fell. Real estate, consumer discretionary, and health care led. "Market leadership showed signs of rotation," said Rachel Dashiell, head of technical research and strategy at the Schwab Center for Financial Research (SCFR), in the Weekly Trader’s Outlook. "Consumer staples and utilities—traditionally defensive sectors—showed signs of improving relative trends."

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is essentially flat at 5.240%.

The U.S. Dollar Index ($DXY) is higher by 0.21 at 102.42.

WTI Crude Oil (/CL) November futures are higher by 1.92% to $93.61/barrel.

Gold prices have traded in a range of $4,178.10-4,242.30 and were last seen trading lower by ~0.44% to $4,197.70/oz.

Natural Gas prices for September futures have traded in a range of $3.092-3.196 today and were last seen trading lower by 2.64% to $3.135.

Bitcoin (BTC) is lower by ~1.12% over the last 24 hours to $82,745.10 today.

Shares of Salesforce Inc. (CRM + $6.22 to $235.22) are gapping up this morning after Bank of America (BofA) "double upgraded" the enterprise cloud and software services provider to "Buy" from "Underperform" and hiked their price target on the stock to $285.00 from $160.00. BofA analyst Tal Liani said that his conversations with CIOs and other market participants suggest that large enterprises are unlikely to replace platforms that house their business logic, data, workflows and compliance frameworks, and AI could deepen the dependence on the types of platforms that Salesforce provides. Calls are outpacing puts nearly 2:1 with the October 16^th 240.00 call being the highest volume contract (volume is 2,878).

Also trading to the upside this morning is T-Mobile US Inc. (TMUS + $4.28 to $152.86) after Raymond James upgraded the wireless communications services provider to "Outperform" from "Market Perform" and put a $170.00 price target on the stock. Raymond James analyst Ric Prentiss said that the recent fears over potential competition from SpaceX are overblown, and competition from larger players is nothing new to T-Mobile. Calls are outnumbering puts ~2:1, but the October 16^th 140.00 put is seeing the most action from traders (volume is 2,183).

New 52-week highs (53 new highs today): Abbvie Inc. (ABBV + $2.86 to $279.33), Moderna Inc. (MRNA + $0.40 to $225.40), Visa Inc. (V + $4.04 to $389.49)

Some unusual call activity (~6:1 calls over puts on 4x average daily volume at midday) is being seen in midstream energy services provider Enterprise Products Partners L.P. (EPD - $0.14 to $35.94) as option traders primarily target the October 16^th 36.50 call. Volume on this contract is 2,533 versus open interest of 516, so we know that the activity primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought around the same time at the ask price of $0.15 each, which suggests bullish intent.

Shares of Adobe Inc. (ADBE - $5.22 to $237.04) are trading lower this morning after Wells Fargo "double downgraded" the digital content creation software maker to "Underweight" from "Equal Weight" and cut their price target to $225.00 from $270.00. Analysts at Wells Fargo are cautious on the company's guidance, noting that Adobe maintained its full-year outlook for about 10.2% annual recurring revenue (ARR), but believe net-new ARR declined more than 40% in Q3 and Q4 net new ARR would need to nearly double to make full-year numbers. Puts are outnumbering calls better than 2:1 with the October 16^th 227.50 put seeing the most action from traders (volume is 1,822).

Also trading to the downside this morning is Palo Alto Networks Inc. (PANW - $10.10 to $408.68) after Phillip Securities downgraded the cybersecurity firm to "Reduce" from "Neutral" while raising their price target on the stock to $346.00 from $320.00. Analysts at Phillip Securities believe the company's valuation, along with several other software stocks, has become "stretched" following the recent rally. Calls are outnumbering puts ~3:2 with the October 16^th 455.00 call being the highest volume contract (volume is 503).

New 52-week lows (169 new lows today): Boot Barn Holdings Inc. (BOOT - $0.42 to $119.54), Charter Communications Inc. (CHTR - $0.61 to $102.77), Wynn Resorts Ltd. (WYNN - $1.24 to $73.91)

Some unusual put activity (~7:1 puts over calls) is being seen in Canadian Solar Inc. (CSIQ - $0.12 to $11.26) which is primarily being driven by a 3,000-contract block that was bought on the January 2029 5.00 put for $1.15 when the bid/ask spread was $0.95 x $1.20 (open interest is 1). We know that this block is a new position based on the open interest figure, and we can assume that the intent is bearish in nature since the trade took place above the midpoint of the bid/ask spread.

Sunbelt Rental Holdings Inc. (AGI + $1.30 to $76.47): Option volume is running at ~26x the daily average on this equipment rental company as option traders primarily target the October 16^th 80.00 call. Volume on this contract is 2,570 versus open interest of 541, so we know that the activity primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.35-0.55 each, which suggests bullish intent.

GE HealthCare Technologies Inc. (GEHC + $2.32 to $68.06): Option volume is running at ~10x the daily average on this healthcare technology company which is primarily being driven by a couple of large blocks that simultaneously traded on the October 30^th expiration earlier this morning:

• 68.00 call (open interest is 399): A 2,000-contract block was bought at for $2.00 when the bid/ask spread was $1.45 x $2.20.
• 72.00 call (open interest is 19): A 2,000-contract block was sold for $0.70 when the bid/ask spread was $0.25 x $1.60.

We know that both these blocks are new positions based on the respective open interest figures, and it appears that a $4.00-wide bull call spread was established for a net debit of $1.30 (x 2K contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that GEHC will close above the break-even price of $69.30 at expiration. GEHC is scheduled to report Q3 earnings on October 28^th before the bell, so this positioning captures the potential impact of that event.

Fiserv Inc. (FISV + $0.91 to $46.54): Option volume is running at ~10x the daily average on this provider of payments and financial technology solutions as option traders primarily target the November 20^th 50.00 call. Volume on this contract is 16,939 versus open interest of 1,681, so we know that the activity primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $1.55-1.70 each, which suggests bullish intent. FISV is scheduled to report Q3 earnings on November 3^rd before the bell, so this positioning captures the potential impact of that event.

The Cboe Volatility Index (VIX + 0.31 to 15.15) has been in positive territory all day today (the intraday range is 15.15-15.53), as equity markets are mixed around the midday mark (DJI + 263, SPX - 1, $COMP - 83, RUT - 3). VIX option volume has been tepid today at 156,693 contracts, and calls are outnumbering puts better than 4:1 so far today.