Today's Options Market Update

U.S. stocks are mixed as a heavy week of earnings and economic data commences. Information Technology issues have been volatile, while Energy and Financials stocks continue to cool off. Caution may be setting in ahead of one of the busiest weeks for earnings season and as the Federal Reserve is set to deliver its first monetary policy decision of 2021. The markets are digesting some favorable news regarding the fight against festering COVID-19 cases and variants after Moderna announced that its vaccine appears to hold efficacy against the variants first found in the U.K. and South Africa. In other equity news, Kimberly-Clark posted positive Q4 and guidance, and AMC Entertainment said imminent bankruptcy risks are off the table after recent capital raising efforts. In economic news, Dallas manufacturing output unexpectedly slowed but remained in expansion territory. Treasuries are gaining ground to apply downside pressure on yields and the U.S. dollar is rising. Gold has turned lower and crude oil prices are mixed. Asia finished mostly higher and Europe is being mostly hamstrung by the aforementioned weakness in Financials and Energy.   

At 12:57 p.m. ET, the Dow Jones Industrial Average is down 0.4%, the S&P 500 Index is flat, and the Nasdaq Composite is increasing 0.2%. WTI crude oil is declining $0.17 to $52.10 per barrel and Brent crude oil is gaining $0.14 to $55.55 per barrel. The Bloomberg gold spot price is declining $2.16 to $1,853.46 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is advancing 0.2% to 90.45. Natural Gas prices have traded in a range of $2.504-2.583 and were last seen trading lower by $0.109 (or + 4.46%) to $2.555/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Shares of Kimberly-Clark Corp. (KMB + $7.43 to $139.64) are moving above the 50-day Simple Moving Average (SMA) after the consumer products company reported Q4 earnings of $1.69 per share ($0.07 beat) on revenue that rose 5.5% year-over-year to $4.84B (above the $4.73B expected). Looking ahead, the company said that fiscal-year 2021 EPS is expected to come in a range of $7.75-8.00 (vs. the $7.78 consensus estimate) on revenue of ~$19.9-20.3B (above the $19.58B expected). Calls are outpacing puts better than 2:1 with the January 29^th 140.00 call topping the most actives list (volume is 1,288).

Also trading to the upside this morning is Cleveland-Cliffs Inc. (CLF + $0.67 to $17.07) after the iron ore producer said that it expects Q4 revenue to come in a range of approximately $2.2-2.3B (above the $2.04B consensus estimate) and adjusted EBITDA to come in a range of $280-290M, which represents a ~150% increase year-over-year and a six-year high. Calls are outpacing puts roughly 10:1 with the March 19^th 21.00 call leading the way (volume is 16,120).

Lastly, shares of Regeneron Pharma Inc. (REGN + $10.42 to $548.20) after BMO Capital Markets upgraded the drug maker to “Outperform” from “Market Perform” while maintaining their $630.00 price target on the stock. Calls are outnumbering puts roughly 2:1 with the January 2022760.00 call seeing the most action from traders (volume is 123).

New 52-week highs (378 new highs today): Apple Inc. (AAPL + $2.90 to $141.97), Cheesecake Factory Inc. (CAKE + $2.50 to $44.86), iRobot Corp. (IRBT + $29.60 to $128.54)

Notable Call Activity

Some unusual call activity (~30:1 over puts) is being seen in Sirius XM Holdings Inc. (SIRI + $0.03 to $6.00) which is primarily being driven by activity on the February 19^th 6.50 call. Volume on this contract is 68,600 versus open interest of 536, 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 for between $0.30 and $0.35 each, which suggests bullish intent.  

Smile Direct Club Inc. (SDC + $1.04 to $12.10): Calls are outpacing puts roughly 16:1 which is primarily due to activity on the February 5^th 12.50 call. Volume on this contract is 8,959 (vs. open interest of 13,051) which mostly consisted of various-sized blocks that were being bought at various times for between $0.33 and $0.63 each. However, we don’t know whether we have any new positioning here since volume is below open interest.  

Today’s Bearish Activity   

Moving lower this morning is Bank of Hawaii Corp. (BOH - $4.31 to $79.80) after the bank holding company reported Q4 earnings of $1.06 per share ($0.05 miss) on revenue that fell 3.2% year-over-year to $165.9M (above the $162.5M expected). The company’s provision for credit losses for the full-year 2020 was $117.8M versus $16.0M in the prior year. Puts are slightly outnumbering calls with the February 19^th 75.00 put leading the way (volume is 33).

Also trading to the downside is Box Inc. (BOX - $0.44 to $17.41) after D.A. Davidson downgraded the cloud content management company to “Neutral” from “Buy” and lowered their price target to $18.00 from $24.00. D.A. Davidson analyst Rishi Jaluria cited competition from Microsoft’s OneDrive and more muted margin expansion as COVID-related cost savings start to fade. Calls are outnumbering puts roughly 5:2 with the March 19^th 20.00 call attracting the most attention from traders (volume is 324).

New 52-week low (1 new low): Geo Group Inc. (GEO - $0.25 to $8.11)

Notable Put Activity  

Some unusual put activity (better than 40:1 over calls) is being seen in the iShares MSCI South Korea ETF (EWY + $1.11 to $94.93) which is primarily due to a 7,635 contract block that was bought on the March 19^th 92.00 put at the ask price of $3.70 (open interest is 0). We know 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 at the ask price.

Volume Signals     

AMC Entertainment Holdings Inc. (AMC + $0.88 to $4.39): The 2^nd most actively traded option contract in the market today is the AMC 1/29/2021 7.00 call as volume is 90,713 versus open interest of 16,225 (suggesting that this primarily represents new positioning). The majority of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $0.55 and $0.60 each (suggesting bullish intent). Note: AMC average implied volatility is up over 100% over the past 2 trading days (currently 358%). Note: the average implied volatility represents an estimated value for a 30-day implied volatility at the current underlying price, based on a curve fit of option implied volatilities.           

Blackberry Ltd. (BB + $3.11 to $17.15): The 3^rd most actively traded option contract in the market today is the BB 1/29/2021 25.00 call as volume is 89,189 versus open interest of 4,929 (suggesting that this primarily represents new positioning). The majority of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $2.02 and $2.65 each (suggesting bullish intent). Note: BB average implied volatility is currently 289%, which is nearly 4x the average IV closing level of 72% back on January 13^th.

Casper Sleep Inc. (CSPR + $0.40 to $8.04): Option volume is running at roughly 50x the daily average of 289 contracts as option traders primarily target the September 17^th 7.50 call. Volume on this contract is 9,053 versus open interest of 18, so it’s likely that this is nearly all new positioning. The majority of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $3.20 and $4.20 each, which suggests bullish intent.

Iron Mountain Inc. (IRM + $2.21 to $32.36): Option volume is running at roughly 45x the daily average of 489 contracts as option traders primarily target the March 19^th 35.00 call. Volume on this contract is 8,457 versus open interest of 53, so it’s likely that this is nearly all new positioning. The majority of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $0.50 and $0.85 each, which suggests bullish intent.

Gauging Volatility

The CBOE Volatility Index (VIX + 0.44 to 22.02) has been in positive territory all day today (intraday range is 22.20-26.63) as equity markets are mixed around the mid-day mark today (DJI - 142, SPX - 4, COMPX + 11). VIX option volume has been tepid today (currently missing from the top 10 most actives list) and the activity has been slightly call-biased (the volume put/call ratio is currently 0.91). However, the most actively traded contract is the February 17^th 21.00 put as volume is 23,474 versus open interest of 385,050.    

Volatility in shares of GameStop Inc. (GME + $10.06 to $75.07) continues as the stock has traded in a range of $61.13-$159.18 so far today. Average implied volatility is currently 387%, which is off the intraday high of ~540%, but roughly 50% higher than Friday’s 250% closing level.   

Bed Bath & Beyond Inc. (BBBY + $3.34 to $33.54): The stock has traded in a range of $30.31-47.73 so far today and average implied volatility is up to 171% from Friday’s 99% closing level.

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.