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Today's Options Market Update

Stocks higher despite soft employment report.

U.S. stocks are looking to end a choppy week positively, with Information Technology issues regaining some footing, despite a much softer-than-expected read on April employment growth. The report seems to be suggesting the recovery is taking longer than many economists were estimating, easing concerns about the Fed reining in its extremely accommodative monetary policy. Treasuries initially rose on the jobs report, which applied some downside pressure on yields, but bond prices have turned mixed in choppy action. The U.S. dollar continues to give back all of Q1's rally and crude oil prices are little changed, while gold is gaining solid ground. Earnings results continue to pour in to close out the week, with reports from Beyond Meat, Peloton Interactive and Cigna fostering mixed reactions. Asia finished mixed ahead of the U.S. jobs report and some upbeat data in the region, while Europe is trading mostly higher, bolstered by strong earnings and economic data.      

At 10:54 a.m. ET, the Dow Jones Industrial Average is up 0.4%, the S&P 500 Index is rising 0.7%, and the Nasdaq Composite is 1.2% higher. WTI crude oil is dipping $0.01 to $64.70 per barrel and Brent crude oil is decreasing $0.17 to $67.92 per barrel. The Bloomberg gold spot price is advancing $15.22 to $1,830.44 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is dropping 0.6% to 90.34. Natural Gas prices have traded in a range of $2.905-2.952 and were last seen trading lower by $0.016 (or +0.55%) to $2.944/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Multiple names are moving higher following upbeat earnings announcements:

  • Bill.com Holdings Inc. (BILL + $18.04 to $148.37): The provider of cloud-based software that helps simplify back-office financial operations for small and midsize businesses reported a fiscal Q3 loss of $0.02 per share, excluding non-recurring items ($0.05 beat) on revenue that rose 44.9% year-over-year to $59.74M (above the $54.51M expected). Looking ahead, the company said that it expects to report a Q4 loss of $0.04-0.05 per share on revenue that is expected to come in a range of $60.9-61.9M which is better than the respective ($0.07) and $57.25M consensus estimates. Calls are outnumbering puts roughly 2:1 with the May 21st 145.00 call leading the way (volume is 122).  
  • Expedia Group Inc. (EXPE + $12.81 to $177.63): The online travel company reported a Q1 loss of $0.02 per share, excluding non-recurring items ($0.35 beat) on revenue that fell 43.6% year-over-year to $1.25B (above the $1.11B expected). Gross bookings were down 14% to $15.422B, lodging revenue decreased 41% and air revenue decreased 55% (all year-over-year). In terms of guidance, the company said that Q2 revenue is expected to come in a range of $680-690M, which is above the $678.27M consensus estimate. Calls are outnumbering puts roughly 2:1 with the May 7th 180.00 call garnering the most attention from traders (volume is 1,048).
  • Roku Inc. (ROKU + $40.06 to $324.24): The streaming company reported Q1 earnings of $0.54 per share ($0.67 beat) on revenue that increased 79.0% year-over-year to $574.2M (above the $490.95M expected). Roku added 2.4M incremental active accounts during the quarter (to 53.6M) with the average revenue per user (ARPU) increasing 32% year-over-year to $32.14. The company issued upside guidance as Q2 revenue is expected to come in a range of $610-620M versus the $548.43M consensus estimate. Calls are outnumbering puts roughly 3:2 with the May 7th 330.00 call being the most actively traded contract (volume is 10,276).

 

New 52-week highs (292 new highs today): Accenture PLC (ACN + $2.03 to $293.19), Cleveland-Cliffs Inc. (CLF + $0.40 to $20.86), Nucor Corp. (NUE + $1.06 to $96.75)

 

Notable Call Activity

Some unusual call activity (~100:1 over puts) is being seen in Dish Network Corp. (DISH + $0.54 to $46.47) which is primarily being driven by a 5,000 contract block that was bought on the June 18th 45.00 call for $3.30 when the bid/ask spread was $3.15 x $3.40 (open interest is 12,652). However, we don’t know whether this is a new (bullish) position since the block size is below open interest.

Today’s Bearish Activity    

Several stocks are trading to the downside following quarterly earnings announcements:

  • Appian Corp. (APPN - $1.13 to $97.80): The low-code automation platform reported a Q1 loss of $0.06 per share, excluding non-recurring items ($0.08 beat) on revenue that rose 12.7% year-over-year to $88.86M (above the $82.71M expected). The company issued downside guidance as it expects to report a Q2 loss of $0.23-0.26 per share on revenue that is expected to come in a range of $77-78M versus the respective ($0.16) and $83.75M consensus estimates. Shares of APPN opened at $87.00, which is the exact low of the day as well (at least at the time of this writing). Puts are outnumbering calls roughly 3:1 with the May 21st 95.00 put topping the most actives list (volume is 719).
  • Insulet Corp. (PODD - $14.44 to $238.72): The maker of tubeless insulin pump technology products reported Q1 EPS net of breakeven ($0.09 miss) on revenue that rose 27.4% year-over-year to $252.3M (above the $247.1M expected). The company issued downside Q2 guidance as revenue is expected to come in a range of $248.9-258.0M (vs. the $261.22M expected), while raising their fiscal-year 2021 revenue growth guidance to a range of 16-20% from 15-20%. Shares of PODD are trading below the 200-day Simple Moving Average (SMA) this morning for the first time since last June. Option volume is relatively light with the September 17th 250.00 call being the most actively traded contract (volume is 60).
  • Shake Shack Inc. (SHAK - $12.63 to $92.99): The burger chain reported Q1 earnings of $0.04 per share ($0.13 beat) on revenue that rose 8.4% year-over-year to $155.3M (below the $160.89M expected) as same-store sales were +5.7% vs. the same period last year. The company issued in-line Q2 revenue guidance, which is expected to come in a range of $174-183M (vs. the $181.05M expected) and said that it expects to open 35-40 company-owned stores. Puts are outnumbering calls roughly 3:2 with the June 18th 80.00 put seeing the most action from traders (volume is 595).

 

New 52-week lows (14 new lows): Aurinia Pharma Inc. (AUPH - $1.90 to $10.44), Beyond Meat Inc. (BYND - $4.38 to $114.66), ChemoCentryx Inc. (CCXI - $16.02 to $11.47)

Notable Put Activity  

Some unusual put activity (~100:1 over calls) is being seen in TG Therapeutics Inc. (TGTX + $0.31 to $40.16) which is primarily being driven by two large blocks that simultaneously traded on the May 21st expiration earlier this morning:

  • 39.00 put (open interest is 40): A 5,000 contract block was bought for $1.80 when the bid/ask spread was $0.15 x $2.00.
  • 34.00 put (open interest is 604): A 5,000 contract block was sold at the bid price of $0.30.

We know these blocks are new positions based on the respective open interest figures and it appears that a $5.00-wide bear put spread was established for a net debit of $1.50 (x 5,000 contracts x 100 multiplier, excluding commissions), which suggests that the block trader believes that TGTX will close below the break-even price of $37.50 at expiration.

Volume Signals       

iShares MSCI Brazil ETF (EWZ + $0.71 to $37.72): The 4th most actively traded contract in the market today is the EWZ 6/18/2021 39.00 call as volume is 91,207 versus open interest of 85,811. Over 90% of the volume on this contract is being attributed to an 84,940 contract block that was bought at the ask price of $0.92. It’s likely that this block trade represents a new (bullish) position given the expiration date, but we can’t be sure given the open interest figure.   

Auris Medical Holding Inc. (EARS + $0.51 to $3.38): Option volume is running at roughly 35x the daily average of 198 contracts as option traders primarily target the May 21st 5.00 call. Volume on this contract is 5,345 versus open interest of 1,864, so we know 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 at the ask price $0.25 each, which suggests bullish intent.

iShares TIPS Bond ETF (TIP + $0.25 to $127.75): Option volume is running at over 25x the daily average of 238 contracts which is primarily being driven by two large blocks that simultaneously traded on the September 17th expiration earlier this morning:

  • 127.00 put (open interest is 19): A 2,898 contract block was bought at the ask price of $2.15.
  • 123.00 put (open interest is 158): A 2,898 contract block traded for $0.75 when the bid/ask spread was $0.65 x $0.80.

Since the block trade on the 127.00 put took place at the ask price, it appears that a $4.00-wide bear put spread was established for a net debit of $1.40 (x 2,898 contracts x 100 multiplier, excluding commissions), which suggests that the block trader believes that TIP will close below the break-even price of $125.60 at expiration.

21Vianet Group Inc. (VNET + $0.88 to $25.67): Option volume is running at roughly 5x the daily average of 1,140 contracts as option traders primarily target the September 17th 26.00 call. Volume on this contract is 5,620 versus open interest of 10, so it’s likely that this is nearly all new positioning. The majority of the transactions on this contract consisted of various mid-sized blocks (1,011, 233, 215, 210, etc.) that were being bought around the same time at the ask price $3.70 each, which suggests bearish intent.

Gauging Volatility

The CBOE Volatility Index (VIX - 1.21 to 17.18) has been on both sides of the unchanged line today (the intraday range is 17.13-18.57) as equity markets are higher around the mid-day mark today (DJI + 164, SPX + 32, COMPX + 171). 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 0.34). The most actively traded contract is the May 19th 60.00 call as volume is 36,381 versus open interest of 165,760.    

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.

What You Can Do Next

  • Schwab clients: Contact a Trading Specialist at 800-435-9050 for questions or log in to the Schwab Learning Center.

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This material includes information obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. All corporate names and market data shown above are for illustrative purposes only and are not a recommendation, offer to sell, or a solicitation of an offer to buy any security. All references to subjects (securities, indexes, futures contracts, and options contracts) were derived based on screens conducted by the writer for certain anomalous activity such as volumes, volatility and other related market data. As needed for brevity, the writer may have applied discretion when choosing among screen outputs for inclusion. Such discretion may have been based on news reports or other considerations of public interest. The views or opinions are those of the writer, and are subject to change without notice. All referenced subjects were chosen for illustrative purposes only and should not be considered recommendations, offers to sell, or solicitations of offers to purchase. Schwab Center for Financial Research ("SCFR") is a division of Charles Schwab & Co., Inc. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. Past performance is no guarantee of future results.

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