Today's Options Market Update
Bulls Look to Regain Ground Following Last Week's Pullback
Investors are looking to bounce back from Friday's sell-off and may be off to a good start: S&P 500 index futures rose more than 0.5% ahead of the opening bell. All Magnificent Seven stocks were trading higher in premarket action with Amazon (AMZN) and Nvidia (NVDA) leading the charge at 1.8% and 1.2% respectively. And expectations of a September rate cut rose to 83.4% early Monday, according to the CME FedWatch Tool, from under 40% Thursday.
The disappointing July nonfarm payrolls report on Friday missed expectations of 102,000 reporting 73,000 jobs added. The government dramatically cut its estimates for May and June job gains by a combined 258,000, putting them at levels well below what's needed to keep pace with population growth. It was the most dramatic downward revision since the height of the pandemic in May 2020 and suggests the economy might be slowing. The unemployment rate rose to 4.2% in July from 4.1% in June.
In response to the ill-received jobs numbers, President Trump fired Bureau of Labor Statistics (BLS) commissioner Erika McEntarfer late Friday, speculating that the data released was inaccurate. In other departure news, Federal Reserve Governor Adriana Kugler said she would step down before her term ends in January. Trump can now select a replacement—someone on the seven-person committee who could be seen as the heir to Jerome Powell's throne.
Source: Schwab Center for Financial Research
Morning Rush
The 10-year U.S. Treasury yield (TNX) is lower by ~1 basis points to 4.20%.
The U.S. Dollar Index ($DXY) is lower by 0.35 to 98.80.
WTI Crude Oil (/CL) is lower by 0.80% to $66.79/barrel.
Gold prices have traded in a range of $3,397.90-$3,439.50, last seen trading higher by 0.86% to $3,429.00/oz.
Natural Gas prices have traded in a range of $2.903-3.078 and were last seen trading lower by 5.58% to $2.911.
Bitcoin (BTC) is higher by ~0.66% today to $114,968.90.
Today's Bullish Activity
Gapping up to the highest levels since 2021 this morning is IDEXX Labs Inc. (IDXX + $123.81 to $659.35) after the animal diagnostic and health care company reported Q2 EPS of $3.63 ($0.33 beat) on revenue that rose 11% year-over-year to $1.11B (above the $1.07B expected). The company also issued upside guidance as full-year 2025 (FY25) EPS is expected to come in a range of $12.40-12.76 on FY25 revenue that is expected to come in a range of $4.21-4.28B (above the respective $12.21 & $4.15B FactSet consensus estimates). Puts are outnumbering calls ~3:2, but the August 15th 560.00 call is the highest volume contract (volume is 104).
Also trading to the upside this morning is Spotify Technology S.A. (SPOT + $36.80 to $663.95) following news that the music streaming platform will raise the price of its premium individual subscription in select markets starting in September. SPOT said it will increase the price to €11.99 (from €10.99) in markets including South Asia, the Middel East, Africa, Europe, Latin America and the Asia-Pacific region. Puts are outnumbering calls ~4:3 with the August 8th 600.00 put seeing the most action from traders (volume is 1,600).
New 52-week highs (85 new highs today): Agnico-Eagle Mines Ltd. (AEM + $4.87 to $130.09), Constellation Energy Corp. (CEG + $10.99 to $351.76), Vistra Energy Corp. (VST + $3.75 to $211.80)
Notable Call Activity
Some unusual call activity (~100:1 calls over puts) is being seen in communications service provider Ericsson (ERIC + $0.15 to $7.41) which is primarily being driven by a 1,370-contract block that was bought on the October 17th 8.00 call at the ask price of $0.15 (open interest is 284). We know that this block is a new position based on the open interest figure, and we can assume that the intent is bullish in nature since the trade took place at the ask price.
Today's Bearish Activity
Gapping down to a five-year low this morning is Bruker Corp. (BRKR - $4.21 to $33.78) after the life science and clinical research company reported Q2 earnings of $0.32 per share, excluding non-recurring items ($0.09 miss) on revenue that fell 0.4% year-over-year to $797.4M (below the $810.14M FactSet consensus estimate). The company also lowered guidance as FY25 EPS is now expected to come in a range of $1.95-2.05 (from $2.40-2.48) and FY25 revenue is now expected to come in a range of $3.43-3.50B (from $3.48-3.55B). Option volume is relatively light with the August 15th 32.50 put being the highest volume contract (volume is 88).
Also trading to the downside this morning is ON Semiconductor Corp. (ON - $6.03 to $50.79) after the chip maker reported Q2 earnings of $0.53 per share, excluding non-recurring items (in-line with estimates) on revenue that fell 15.4% year-over-year to $1.47B (above the $1.45B FactSet consensus estimate). Looking ahead, ON said that Q3 EPS is expected to come in a range of $0.54-0.64 on Q3 revenue that is expected to come in a range of $1.465-1.565B (versus the respective $0.58 & $1.50B FactSet consensus estimates). Puts are outnumbering calls nearly 3:1 with the October 17th 41.00 put leading the way (volume is 17,789).
New 52-week lows (58 new lows today): Charter Communications Inc. (CHTR - $0.20 to $265.49), Diageo PLC (DEO - $0.50 to $96.96), Waters Corp. (WAT - $1.77 to $288.54)
Notable Put Activity
Some unusual put activity (~47:1 puts over calls) is being seen in Aflac Inc. (AFL - $0.10 to $97.99) which is primarily being driven by a couple of large blocks that simultaneously traded on the August 8th expiration earlier this morning:
- 97.00 put (open interest is 28): A 3,800 contract block was bought for $1.40 when the bid/ask spread was $1.20 x $1.50.
- 93.00 put (open interest is 3): A 3,800 contract block was sold for $0.50 when the bid/ask spread was $0.45 x $0.70.
We know that both these blocks are new positions based on the respective open interest figures, and it appears that a $4.00-wide bear put spread was established for a net debit of $0.90 (x 3,800 contract x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that AFL will close below the break-even price of $96.10 at expiration. AFL is scheduled to announce Q2 earnings tomorrow after the bell, so this positioning captures the potential impact of that event.
Volume Signals
Grocery Outlet Holdings Corp. (GO + $0.16 to $13.66): Option volume is running at ~165x the daily average on this retailer of consumables and fresh products which is primarily being driven by a 10,350-contract block that was bought on the August 15th 12.50 put for $0.45 when the bid/ask spread was $0.35 x $0.50 (open interest is 281). 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. GO is scheduled to announce Q2 earnings tomorrow after the bell, so this positioning captures the potential impact of that event.
Lattice Semiconductor Co. (LSCC + $0.33 to $49.32): Option volume is running at ~31x the daily average on this chip maker which is primarily being driven by a couple of large blocks that simultaneously traded on the August 15th expiration earlier this morning:
- 50.00 call (open interest is 112): A 1,170-contract block was bought for $2.72 when the bid/ask spread was $2.40 x $2.90.
- 60.00 call (open interest is 674): A 1,170-contract block was sold for $0.32 when the bid/ask spread was $0.30 x $0.50.
We know that both these blocks are new positions based on the respective open interest figures, and it appears that a $10.00-wide bull call spread was established for a net debit of $2.40 (x 1,170 contract x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that LSCC will close above the break-even price of $52.40 at expiration. LSCC is scheduled to announce Q2 earnings today after the bell, so this positioning captures the potential impact of that event.
Champion Homes Inc. (SKY + $0.25 to $65.09): Option volume is running at ~17x the daily average on this home builder which is primarily being driven by a 2,500-contract block that was bought on the November 21st 80.00 call for $2.99 when the bid/ask spread was $2.50 x $3.00 (open interest is 124). We know that this block is a new position based on the open interest figure, and we can assume that the intent is bullish in nature since the trades took place above the midpoint of the bid/ask spread.
Gauging Volatility
The Cboe Volatility Index (VIX - 2.33 to 18.05) has been in negative territory all day today (intraday range is 17.84-19.58), as equity markets are higher across the board around the midday mark (DJI + 485, SPX + 81, COMP + 364). VIX option volume is above average today at 361,158 contracts, which puts the index at the #10 spot on the "Top Volume by Underlying" list. The volume put/call ratio is currently 0.39 with the highest volume contract being the August 20th 24.00 call (volume is 32,617 vs. open interest of 90,580).
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