Today's Options Market Update

August 17, 2022 Nathan Peterson
Stocks lower on soft economic data.

U.S. stocks are trading lower following a couple days of resiliency in the face of some disappointing economic data in China and the U.S. The markets are digesting mixed signals from the retail front, with Target Corporation missing earnings estimates, while Lowe's Companies topped profit projections and July retail sales came in mostly higher than anticipated. Additionally, TJX Companies beat earnings expectations but lowered guidance. Treasuries are lower to lift yields, and the U.S. dollar continues to climb. Crude oil prices are increasing, and gold is decreasing. In other economic news, June business inventories rose in line with forecasts. The markets are highly anticipating the release of the minutes from the Fed's July monetary policy meeting that will come out later today, after which it raised its benchmark interest rate target by 75 basis points. Asia finished mostly to the upside and Europe is lower in late-day action on the heels of hotter-than-expected U.K. inflation reports.

At 10:48 a.m. ET, the Dow Jones Industrial Average is down 0.5%, the S&P 500 Index is decreasing 0.8%, and the Nasdaq Composite is declining 1.4%. WTI crude oil is up $1.44 to $87.97 per barrel, and Brent crude oil is increasing $1.25 at $93.59 per barrel. The gold spot price is trading $8.70 lower to $1,781.00 per ounce, and the Dollar Index is advancing 0.2% to 106.70. Natural Gas prices have traded in a range of $8.785-9.35 and were last seen trading higher by $0.398 (or +4.56%) to $9.126/MMBtu. 

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Shares of Agilent Technologies Inc. (A + $8.83 to $141.60) are gapping up above the 200-day Simple Moving Average (SMA) this morning after the maker of lab instruments and other components reported fiscal Q3 earnings of $1.34 per share, excluding non-recurring items ($0.13 beat) on revenue that rose 8.3% year-over-year to $1.72B (above the $1.64B expected). Looking ahead, the company said that Q4 EPS is expected to come in a range of $1.38-1.40 (above the $1.34 expected) on Q4 revenue that is expected to come in a range of $1.75-1.775B (versus the $1.77B expected). Calls are outnumbering puts ~4:1 with the August 19th 145.00 call being the highest volume contract (volume is 869).

Also trading to the upside is Performance Food Group Inc. (PFGC + $0.92 to $54.24) after the food distributor reported fiscal Q4 earnings of $1.07 per share, excluding non-recurring items ($0.03 beat) on revenue that rose 56.8% year-over-year to $14.59B (slightly above the $14.56B expected). Looking ahead, the company said that Q1 revenue is expected to come in a range of $14.2-14.5B (vs. the $14.27B consensus estimate) and Q2 revenue to come in a range of $13.5-13.8B (vs. the $13.71B consensus estimate). Option volume is relatively light with the August 19th 50.00 put being the highest volume contract (volume is 17).

New 52-week highs (45 new highs today): Automatic Data Processing Inc. (ADP + $0.74 to $260.78), Northrop Grumman Corp. (NOC + $7.92 to $493.42), Progressive Corp. (PGR + $4.10 to $126.59)

Notable Call Activity

Some unusual call activity (~6:1 over puts) is being seen in Silicon Carbide provider Wolfspeed Inc. (WOLF - $3.81 to $84.74) which is primarily being driven by a couple of large blocks that simultaneously traded on the August 19th expiration earlier this morning:

  • 90.00 call (open interest is 1,250): A 2,000 contract block was bought for $3.28 when the bid/ask spread was $2.85 x $3.40.
  • 100.00 call (open interest is 757): A 2,000 contract block was sold for $0.77 when the bid/ask spread was $0.60 x $1.00.

We know that both of 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 $2.51 (x 2K contracts x100 multiplier, excluding commissions). The positioning suggests that the block trader believes that WOLF will close above the break-even price of $92.51 at expiration. Note: WOLF is scheduled to report Q2 earnings after the bell today, so this positioning captures the potential impact of that event.

Today’s Bearish Activity

Moving lower this morning is Target Corp. (TGT - $7.07 to $173.12) after the retail giant reported Q2 earnings of $0.39 per share, excluding non-recurring items ($0.33 miss) on revenue that rose 3.5% year-over-year to $26.04B (slightly below the $26.07B expected). Target’s Q2 comparable same-store sales increased 2.6% and Q2 digital comparable sales grew 9.0%. Looking ahead, the company said the following: “While the company is planning cautiously for the remainder of the year, current trends support the company’s prior guidance for full-year revenue growth in the low-to-mid-single digit range (vs. the +3.5% expected), and an operating margin rate in a range around 6% in the back half of the year.” Calls and puts are trading roughly even with the August 19th 170.00 put seeing the most action from traders (volume is 7,839).  

Also trading to the downside is Children’s Place Inc. (PLCE - $4.68 to $50.27) after the children’s specialty retailer reported a Q2 loss of $0.89 per share, excluding non-recurring items ($1.52 miss) on revenue that fell 8.0% year-over-year to $380.89M (below the $390.42M expected) as comparable retail sales decreased 8.7% year-over-year. The company issued mixed Q3 guidance as EPS is expected to be $3.95, excluding non-recurring items (above the $3.94 consensus estimate) on revenue that is expected to be $500M (below the $507.80M consensus estimate). Calls are outnumbering puts ~4:1 with the August 19th 55.00 call leading the way (volume is 1,074).  

New 52-week lows (63 new lows today): Avantor Inc. (AVTR - $1.12 to $27.06), Cerence Inc. (CRNC - $0.98 to $21.17), RingCentral Inc. (RNG - $2.41 to $47.76)

Notable Put Activity

Some unusual put activity (~100:1 over calls) is being seen in the iShares MSCI ACWI ex U.S. ETF (ACWX - $0.53 to $46.57) which is primarily being driven by an 18,300 contract block that was bought on the December 16th 44.00 put for $1.30 when the bid/ask spread was $0.70 x $1.50 (open interest is 0). We know that this block is a new position based on the open interest figure and we can assume the intent is bearish in nature since the trade took place above the midpoint of the bid/ask spread.

Volume Signals

nVent Electric PLC (NVT - $0.73 to $36.42): Option volume is running at ~79x the daily average on this provider of electrical connection and protection solutions which is primarily being driven by a 2,000 contract block that traded on the September 16th 35.00 call for $2.25, directly in the middle of the $2.15 x $2.35 bid/ask spread (open interest is 68). We know this block is a new position based on the open interest figure, but the intent is unclear since the trade took place in the middle of the bid/ask spread.

Manchester United PLC (MANU + $0.60 to $13.38): Option volume is running at over 15x the daily average on this English soccer club and the activity is definitively call-biased (~25:1 over puts). Leading the Top Volume list is the March 2023 14.00 call as volume is 21,948 versus open interest of 8. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $0.95-1.55 each, which suggests bullish intent. Note: Shares of MANU are trading higher this morning after Tesla CEO Elon Musk tweeted that he is buying the team, and then later tweeted that it was part of a “long running joke”. 

Privia Health Group Inc. (PRVA + $1.21 to $35.94): Option volume is running at ~2x the daily average on this physician-enablement company which is primarily being driven by two large blocks that were seen simultaneously trading on the September 16th expiration earlier this morning:

  • 37.50 call (open interest is 19): A 1,855 contract block was bought at the ask price of $2.00.
  • 32.50 put (open interest is 15): A 1,855 contract block was sold at the bid price of $1.25.

We know that both of these blocks are new positions based on the respective open interest figures and it appears that a (bullish) risk reversal was established for a net debit of $0.75 (x 1,855 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that PRVA will close above the break-even price of $38.25 at expiration.

Gauging Volatility

The Cboe Volatility Index (VIX + 0.80 to 20.49) has been in positive territory all day today (the intraday range is 19.69-20.63) as equity markets are lower across the board around the mid-day mark (DJI - 250, SPX - 43, COMPX - 207). VIX option volume has been tepid today as the index is currently missing from the “Top Volume by Underlying” list. Today’s options activity has been solidly call-biased (the volume put/call ratio is currently 0.28), with the highest volume contract being the October 19th 26.00 call (volume is 20,627 versus open interest of 9,948).

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.

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