Today's Options Market Update

Growing confidence in the banking system drives expectations that the Fed will hike rates by 25 basis points tomorrow. At the same time, signs of "risk-on" trading spilled over from yesterday, with the U.S. dollar and Treasuries falling and banking stocks on the rise.

As banking uncertainty eased and stock index futures built on yesterday's gains, expectations solidified for a 25-basis-point interest rate hike by the Federal Reserve. The probability of that increase hit 85% this morning, according to the CME FedWatch Tool, up from 60% as recently as early Monday.

A Wall Street Journal report that JP Morgan Chase (JPM) CEO Jamie Dimon is leading discussions to stabilize First Republic Bank (FRC) appeared to lend support to the stock market early Tuesday, and the banking sector—including FRC—rallied in premarket trading.

At the same time, fixed income continued its retreat and volatility gave back about half the gains of the last 12 days. The dollar is also lower, while crude oil rallied. All this suggests concern and uncertainty are easing, and helps reinforce expectations that the Fed might hike rates. Natural Gas prices have traded in a range of $2.127-2.263 and were last seen trading lower by $0.052 (or - 2.34%) to $2.171/MMBtu.

Source: Schwab Center for Financial Research

After appearing here yesterday, one of today's biggest gainers again is Fleetcor Technologies (FLT + $9.94 to $209.02) after the global payments company received an upgrade to Outperform from Market Perform at Raymond James. You'll recall that yesterday FLT reported that it had entered into a cooperation agreement with shareholder, D.E. Shaw that involved members of the FLT board of directors and the formation of a Strategic Review Committee. Option volume is very light with the April 21^st 200.00 call seeing the most action (volume is 11).

Also appearing here yesterday and again today is United Rentals (URI + $13.42 to $391.86) but the only news on the world's largest equipment rental company is an announcement that on Thursday (3/23) it will hold a used equipment sales event at 176 URI locations. Calls are outnumbering puts ~5:4 with the March 24^th 400.00 call getting the most attention from traders (volume is 110).

New 52-week highs (44 new highs today): US Express Enterprises (USX + $4.47 to $5.97), Darden Restaurants (DRI + $2.38 to $153.01), Daktronics (DAKT + $0.11 to $5.02), Emagin (EMAN - $0.11 to $1.86), NVR (NVR + $14.66 to $5,509.13)

Some unusual call activity (~3:1 over puts) is being seen in automaker Ford Motors (F + $0.57 to $11.75) which is primarily being driven by activity on the March 24^th 11.85 call (open interest is 15,254). Volume on this contract is 21,468 including a single block trade of 10,000 contracts that was executed at a price of $0.16 when the bid/ask spread was $0.15/$0.16. Given the open interest, we don't know for sure if this block was a new position, but since it was executed at the ask price it implies bullish sentiment.

One of today's biggest decliners is Altimmune (ALT - $5.73 to $5.19) after the clinical-stage biopharmaceutical company reported positive results from a phase 2 study of its obesity drug (pemvidutide). In the study, patients reduced weight by an average of 10.7% but safety concerns involving nausea, vomiting and dehydration are weighing on the stock. Calls are outnumbering puts ~4:3 but the April 21^st 5.00 put is seeing the most action from traders (volume is 3,549).

Also moving lower today is Royal Gold (RGLD - $4.31 to $121.63) though there does not appear to be any recent news on this precious metals stream and royalty company. Spot Gold prices had risen about 10% in the past 2 weeks, but have given back about 2% in just the last 2 sessions. Calls are outnumbering puts ~4:1 with the April 21^st 135.00 call seeing the most action from traders (volume is 37).

New 52-week lows (32 new lows today): Profrac Holdings (ACDC - $0.98 to $13.70), First Majestic Silver (AG - $1.83 to $5.62), Mineralys Therapeutics (MLYS - $0.29 to $14.57), Planet Labs (PL - $0.02 to $3.45)

Some unusual put activity (~3:2 over calls) is being seen in media company Warner Brothers Discover (WBD + $0.92 to $12.12) which is primarily being driven by activity on the June 16^th 10.00 put (open interest is 4,684). Volume on this contract is 8,124 which is mostly made up of small and medium sized trades that were sold at or near bid prices ranging from $0.21 to $0.25. Based on the open interest, we know that at least some of this is new positioning, and since the traders are selling puts, it implies bullish sentiment.

Quince Therapeutics (QNCX + $0.58 to $1.42): Option volume is running at over 30x the daily average on this biopharmaceutical company which is primarily being driven by activity on the October 20^th 2.50 call. Volume on this contract is 1,180 (versus open interest of 538) which is made up of several small and medium sized trades that executed at or near various ask prices ranging from $0.13 to $0.40. Given the open interest, we don't know how much of these are new positions, but since most of them were executed above the midpoint of the bid/ask spread, they imply bullish sentiment.

Vertex (VERX + $0.37 to $18.24): Option volume is running at over 47x the daily average on this tax technology solutions provider which is primarily being driven by activity on a couple of contracts for the April 21^st expiration:

• 20.00 calls (open interest 54): a 2,970 contract block was sold at $0.70 when the bid/ask spread was $0.15 - $1.10
• 17.50 calls (open interest 14): a 990 contract block was simultaneously bought at $2.40 when the bid/ask spread was $1.30 - $2.55

Given the respective open interest levels, we know that both of these blocks are new positions, and it appears that a vertical call spread (in a 3 x 1 ratio) was executed here at a net debit of $0.30. However, since 3x as many calls were sold as bought, this trader likely either has a long stock position already, or is taking substantial risk to the upside as 1,980 of the 20.00 calls would be uncovered.

The Cboe Volatility Index (VIX - 2.49 to 21.66) has been on both sides of the unchanged line today (the intraday range is 21.65-24.16) as equity markets are mostly higher around the mid-day mark (DJI + 169, SPX + 30, COMPX + 119). VIX option volume has been above average today (622,705) as the index is currently number 6 on the “Top Volume by Underlying” list. The volume put/call ratio is 0.89 with the highest volume contract being the March 22^nd 22.00 put (volume is 77,188 vs. open interest of 112,220).

Interested in receiving notifications of intraday unusual option trades? Follow Schwab’s Managing Director of Trading & Derivatives Randy Frederick on Twitter @RandyAFrederick who will be tweeting unusual options trades as he sees them throughout the day.