Today's Options Market Update
Stocks Rally on Middle East Ceasefire
A shaky truce took shape in the Middle East, giving stocks an early boost after Monday's firm finish. While it's not clear if the war is over and President Trump accused both sides of violating the ceasefire, the impact on crude oil (/CL) was dramatic, easing concerns that inflation could flare. Energy stocks swooned but growth sectors, including tech, enjoyed a Tuesday tailwind in pre-market trading.
Inflation will likely remain in focus at 10 a.m. ET today when Federal Reserve Chairman Jerome Powell delivers his semiannual Monetary Policy Report before the House Financial Services Committee. These occasions often feature Q&A that's more interesting than the testimony itself, given that Powell just last week made his views on the rate path clear. Powell sounded hawkish then and isn't likely to change his tune six days later with little fresh data in hand. The text of his testimony, released before the market opened, showed him still cautious due to tariffs and saying the Fed "is well positioned to wait."
Powell might be probed more intensely about alternate views on rates from other Fed officials who say a rate cut might be appropriate as soon as next month. Chances of a July rate cut rose to almost 23% this morning, according to the CME FedWatch Tool, up from 16% a week ago, and the dollar slipped. Easing Middle East tensions and rate trim hopes lifted major indexes yesterday, with consumer discretionary on top. FedEx (FDX) reports after the close, and last week saw big money flows into U.S. large-cap stocks. Stay tuned for June Consumer Confidence from the Conference Board soon after the open, but analysts don't expect much change.
Source: Schwab Center for Financial Research
Morning Rush
The 10-year U.S. Treasury yield (TNX) is lower by ~2 basis points to 4.296%.
The U.S. Dollar Index ($DXY) is lower by 0.61 to 97.81.
WTI Crude Oil (/CL) is lower by 4.57% to $65.38/barrel.
Gold prices have traded in a range of $3,308.30-$3,385.00, last seen trading lower by 2.33% to $3,315.90/oz.
Natural Gas prices have traded in a range of $3.582-3.684 and were last seen trading lower by 2.22% to $3.616.
Bitcoin (BTC) is higher by ~0.21% today to $105,657.80.
Today's Bullish Activity
Shares of Carnival Corp. (CCL + $2.30 to $26.34) are gapping up this morning after the cruise operator reported Q2 earnings of $0.35 per share ($0.10 beat) on revenue that rose 9.5% year-over-year to $6.33B (above the $6.21B FactSet consensus estimate). The company also issued upside fiscal-year 2025 (FY25) earnings guidance of $1.97 per share versus the $1.88 FactSet consensus estimate. Shares of CCL are trading at a four-month high following the results. Calls are outnumbering puts ~2:1 with the June 27th 27.00 call seeing the most action from traders (volume is 22,689).
Also trading to the upside this morning is Electronic Arts Inc. (EA + $2.15 to $156.56) after Melius Research upgraded the chip maker to "Buy" from "Neutral" and increased their price target on the stock to $185 from $175. Analysts at Roth Capital said the company is positioned for an "elevated, multi-year growth trajectory" and see the company's upcoming Battlefield launch as "the most significant near-term key to share outperformance". Calls are outnumbering puts ~5:1 with the August 15th 150.00 call being the highest volume contract (volume is 2,543).
New 52-week highs (127 new highs today): Broadcom Ltd. (AVGO + $9.15 to $262.92), GE Vernova Inc. (GEV + $1.46 to $501.34), JPMorgan Chase & Co. (JPM + $3.49 to $281.76)
Notable Call Activity
Some unusual call activity (~4:1 calls over puts) is being seen in Uber Technologies Inc. (UBER + $6.25 to $91.50) as every one of the top 10 highest volume contracts is a call. Topping the list is the August 15th 100.00 call as volume is 28,504 versus open interest of 9,618, so we know that the activity primarily represents new positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $2.00-3.20 each, which suggests bullish intent. Shares of UBER are trading over 7% higher this morning following news that the ride hailing company is partnering with Alphabet's Waymo in Atlanta.
Today's Bearish Activity
Shares of Dollar General Corp. (DG - $2.65 to $112.30) are moving lower this morning after Goldman Sachs downgraded the discount retailer to "Neutral" from "Buy" while bumping their price target on the stock to $116.00 from $115.00, citing valuation concerns. Calls are outnumbering puts ~3:1 with the June 27th 115.00 call leading the way (volume is 631).
Also trading to the downside this morning is Advanced Auto Parts Inc. (AAP - $4.20 to $47.73) after Goldman Sachs downgraded the auto parts retailer to "Sell" from "Neutral" and lowered their price target on the stock to $46.00 from $48.00. Analysts at Goldman Sachs cited concerns around the company's competitive position and margin recovery prospects. Calls are outnumbering puts ~3:1 with the July 18th 55.00 call being the highest volume contract (volume is 679).
New 52-week lows (31 new lows today): Black Stone Materials LP (BSM + $0.14 to $13.09), Maase Inc. (MAAS - $0.96 to $8.97), Simulations Plus Inc. (SLP + $0.05 to $17.12)
Notable Put Activity
Some unusual put activity (~119:1 puts over calls) is being seen in Consolidated Edison Inc. (ED - $0.47 to $100.68) which is primarily being driven by a 2,900 contract block that was bought on the July 18th 100.00 put for $1.70 when the bid/ask spread was $1.45 x $1.75 (open interest is 2,019). 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.
Volume Signals
Main Street Capital Corp. (MAIN + $0.86 to $58.78): Option volume is running at ~53x the daily average on this business development company which is primarily being driven by a 2,930 contract block that was bought on the September 19th 49.40 put at the ask price of $0.70 (open interest is 1,445). 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 at the ask price.
PagSeguro Digital Ltd. (PAGS + $0.78 to $9.82): Option volume is running at ~35x the daily average on this payment solutions company which is primarily being driven by activity on the July 18th 10.00 call. Volume on this contract is 24,538 versus open interest of 392, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times at the ask prices of $0.25 & $0.30 each, which suggests bullish intent.
Flywire Corp. (FLYW + $0.32 to $11.34): Option volume is running at ~32x the daily average on this payments enablement and software company which is primarily being driven by activity on the July 18th 12.50 call. Volume on this contract is 1,260 versus open interest of 41, so it's likely that nearly all the volume 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 $0.25 each, which suggests bullish intent.
Gauging Volatility
The Cboe Volatility Index (VIX - 2.15 to 17.68) has been in negative territory all day today (intraday range is 17.65-18.72), as equity markets are higher across the board around the midday mark (DJI + 432, SPX + 58, COMP + 259). VIX option volume is above average today at 359,052 contracts, which puts the index at the #9 spot on the "Top Volume by Underlying" list. The volume put/call ratio is currently 0.29 with the highest volume contract being the August 20th 22.00 call (volume is 22,170 vs. open interest of 64,971).
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