Today's Options Market Update

U.S. stocks are lower in the final session of another volatile week. The extreme uncertainty regarding the depth and duration of the COVID-19's economic and social impact continues to stymie market conviction, with global cases breaching 1 million and the U.S. heading toward the eye of the storm. The markets are assessing a host of March economic data that is painting a negative picture. Job losses in the U.S. nonfarm payroll report were much larger than expected and likely understated after the severe spike in jobless claims that occurred at the end of March and approached the 10 million mark. Moreover, ISM's services sector report, skewed toward larger companies, showed growth remained in expansion territory but posted a decisive drop, while Markit's broader survey of companies varying in size registered the largest contraction on record. Treasury yields are dipping as bond prices nudge higher, while the U.S. dollar remains in demand, gold is rising, and crude oil prices are extending yesterday's surge on optimism of a potential thawing of the price war between Russia and Saudi Arabia. Asia finished mixed and Europe is mostly lower as the global markets digest a host of services sector reports that showed broad-based contractions.       

At 10:58 a.m. ET, the Dow Jones Industrial Average is down 1.2%, while the S&P 500 Index and the Nasdaq Composite are decreasing 1.0%. WTI crude oil is jumping $1.65 to $26.97 per barrel, Brent crude oil is surging $3.86 to $33.80 per barrel, and wholesale gasoline is up $0.05 at $0.72 per gallon. The Bloomberg gold spot price is advancing $5.64 at $1,619.63 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is rallying 0.7% at 100.85. Natural Gas prices have traded in a range of $1.53-1.59 and were last seen trading higher by $0.026 (or + 1.68%) to $1.578/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Gapping up this morning is Tesla Inc. (TSLA + $32.19 to $486.66) after the electric car maker reported Q1 production of 102,672 vehicles and deliveries of 88,400 vehicles, which included 76,200 Model 3’s and Y’s and 12,200 Model S’s and X’s (below the 93,399 vehicle estimate). Puts are outnumbering calls roughly 4:3 but the April 3^rd 500.00 call is seeing the most action from traders (volume is 10,052).   

Also trading to the upside is Constellation Brands Inc. (STZ + $1.33 to $132.55) after the beer, wine and spirits maker reported Q4 earnings of $2.18 per share, excluding non-recurring items ($0.52 beat) on revenue that rose 5.9% year-over-year to $1.9B (above the $1.84B expected). The company said that it is not providing fiscal 2021 guidance due to the potential business impact related to the COVID-19 outbreak. Calls are outnumbering puts nearly 2:1 with the April 3^rd 125.00 call topping the most actives list (volume is 384).

Lastly, shares of Twitter Inc. (TWTR + $0.34 to $23.36) are trading higher after Goldman Sachs upgraded the micro-blogging site to “Buy” from “Neutral” while lowering their price target to $35.00 from $39.00, citing expectations of increased user growth due to the COVID-19 pandemic. Calls are outnumbering puts roughly 5:2 with the April 9^th 25.00 call leading the way (volume is 3,242).

New 52-week highs (4 new highs today): Forty Seven Inc. (FTSV + $0.01 to $95.44), Petmed Express Inc. (PETS - $0.76 to $28.33), RMG Acquisition Corp. (RMG - $0.03 to $9.88), Weis Markets Inc. (WMK - $0.50 to $43.05)

Notable Call Activity

Some unusual call activity (~8:1 over puts) is being seen in the iShares Silver Trust (SLV - $0.12 to $13.41) which is primarily being driven by activity on the April 17^th 14.50 call. Volume on this contract is 29,379 versus open interest of 2,844, so we know that this primarily represents new positioning. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times at the ask prices of $0.26 and $0.27, which suggests bullish intent.  

Today’s Bearish Activity   

Moving lower this morning is Macquarie Infrastructure Corp. (MIC - $6.25 to $17.76) after the provider of petroleum storage and aviation services said that it is withdrawing its 2020 guidance, suspending its dividend and withdrew $599M on its holding company’s revolving credit facility. Commenting on the company’s decision to pursue strategic alternatives back on October 31^st, 2019, the company stated, “We remain confident that there is a significant opportunity to unlock value for our shareholders through a sale of the company or one or more of our businesses and we are continuing to pursue all opportunities that we believe could be in the best interests of the company and its shareholders”. Calls are outnumbering puts roughly 3:2 with the April 17^th 15.00 call being the most actively traded contract (volume is 263).

Also trading to the downside is Chewy Inc. (CHWY - $1.52 to $33.54) after the online pet products retailer reported a Q4 loss of $0.12 per share on revenue that rose 24.5% year-over-year to $1.35B (both were in-line with estimates). In terms of guidance, the company said that Q1 revenue is expected to come in a range of $1.50-1.52B (above the $1.45 consensus estimate) but is not providing full-year guidance due to the COVID-19 pandemic. Puts are outnumbering calls better than 4:3 which is primarily being driven by activity on the April 9^th 35.00 put (volume is 2,134).

New 52-week lows (122 new lows today): American Airlines Group (AAL - $0.19 to $9.87), Dillard’s Inc. (DDS - $2.78 to $22.87), Ryder Systems Inc. (R - $1.05 to $22.95)

Notable Put Activity

Some unusual put activity (better than 50:1 over calls) is being seen in Huazhu Group Ltd. (HTHT - $0.83 to $28.34) which is primarily being driven by activity on the May 15^th 22.50 put. Volume on this contract is 1,974 versus open interest of 0, so we know that this is all new positioning. The bulk of the activity on this contract consisted of various-sized blocks that were being bought at the ask price of $0.55, which suggests bearish intent.

iShares MSCI Turkey ETF (TUR - $0.42 to $18.46): Puts are outnumbering calls roughly 300:1 which is primarily being driven by activity on the April 17^th 19.00 put. Volume on this contract is 4,304 (vs. open interest of 5,064) which mostly consisted of various-sized blocks that were being bought for $1.45 and $1.50 each. However, we don’t know whether these are opening or closing transactions given the open interest figure.

Volume Signals     

L Brands Inc. (LB + $0.48 to $10.63): Option volume is running at roughly 13x the daily average of 3,834 contracts which is primarily being driven by activity on the January 2021 15.00 call. Volume on this contract is 28,291 versus open interest of 20,602, so we know that we have some new positioning here. The activity included three large blocks (9,000, 5,000 and 3,500) that were bought around the same time for $2.43, $2.47 and $2.42 (respectively) when the bid/ask spread was $1.75 x $2.65.

Levi Strauss & Co. (LEVI - $0.80 to $9.27): Option volume is running at over 9x the daily average of 484 contracts which is primarily being driven by activity on the April 17^th 10.00 put. Volume on this contract is 3,187 versus open interest of 378, so we know that this primarily represents new positioning. The bulk of the activity on this contract consisted of various-sized blocks (1,222, 616, 312, 283, etc.) that were bought around the same time at the ask price of $0.80 (suggesting bearish intent).

Dell Technologies Inc. (DELL - $1.41 to $35.73): Option volume is running at over 7x the daily average of 274 contracts which is primarily being driven by activity on the May 15^th 30.00 put. Volume on this contract is 1,444 (vs. open interest of 291), which nearly entirely consisted of a 1,400 block that was bought for $1.26 when the bid/ask spread was $1.05 x $1.30. We know this block is a new position given 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.  

Gauging Volatility

The CBOE Volatility Index (VIX - 1.19 to 49.71) has been on both sides of the unchanged line today (intraday range is 48.11-52.29) as equity markets are lower across the board around the mid-day mark today (DJI - 402, SPX - 45, COMPX - 132). VIX option volume has been tepid today (currently missing from the top 10 most actives list) and the activity has been call-biased (the volume put/call ratio is currently 0.41). The most actively traded contract is the May 20^th 70.00 call as volume is 28,775 versus open interest of 43,635.

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