Today's Options Market Update

Equities give back previous session’s gains.

U.S. stocks are falling, giving back yesterday's solid advance that was boosted by the Bank of England's (BoE) decision to purchase bonds to try to stabilize its financial system. An unexpected drop in weekly initial jobless claims seems to be keeping expectations intact that the Fed will remain aggressive, while U.K. Prime Minister Liz Truss defended her government's tax cuts that appeared to force the BoE's decision. The markets are also digesting an unrevised Q2 GDP figure that showed a second-straight quarterly contraction, while inflation measures for the quarter were revised higher, and personal consumption was adjusted upward. Treasury yields and the U.S. dollar are rebounding from yesterday's drop. Crude oil prices are dipping despite the landfall of Hurricane Ian in Florida, and gold is also trading lower. In equity news, CarMax is falling after missing quarter estimates and Starbucks raised its quarterly dividend. Asia finished mixed and Europe is trading to the downside, as the global markets continue to react to volatile action in the currency and bond markets that was amplified by yesterday's BoE decision.     

WTI crude oil is declining $0.21 to $81.94 per barrel, and Brent crude oil is decreasing $0.18 at $87.87 per barrel. The gold spot price is trading $11.00 lower to $1,659.00 per ounce, and the Dollar Index is increasing 0.1% to 112.75. Natural Gas prices have traded in a range of $6.713 - $7.139 and were last seen trading lower by $0.187 (or -2.69%) to $6.768/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

One of today’s top gainers is Golden Sun Education (GSUN +$12.00 to $40.49). There is no news today and options are not currently listed on this Chinese educational services company.

Also moving higher today is Vail Resorts (MTN +$1.00 to $211.29) after the ski resort operator posted a fiscal Q4 loss of -$2.70 per share, $0.18 above expectations, on revenues that rose 30.8% y/o/y to $267.14M, also ahead of the $262M estimate. Looking ahead, the company said it expects meaningful growth for fiscal 2023 relative to fiscal 2022 and strong Resort EBITDA margin in the range of $893M to $947M. MTN also received price target upgrades from Deutsche Bank to $286 from $283 previously, and from Truist Securities to $281 from $270 previously. Puts are outnumbering calls ~14:1, with the October 21st 130.00 put leading the way (volume is 231).

New 52-week highs (6 new highs today): Aspen Technology (AZPN -$4.53 to $235.12), C&F Financial (CFFI -$0.49 to $54.50), Relmada Therapeutics (RLMD -$0.20 to $34.58)

Notable Call Activity

For the third time this week, some unusual call activity (~14:1 over puts) is being seen in the iShares China Large-Cap ETF (FXI -$0.93 to $25.89) as option traders primarily target the November 18th 36.00 call. Volume on this contract is 47,010 (versus open interest of 57,154). The bulk of the volume on this contract consisted of 2 block trades: 32,280 contracts were bought at the ask price of $0.03 and then about 13 seconds later, 13,600 contracts were also bought at the ask price of $0.03. Since both blocks were smaller than the open interest, we don’t know if the activity represents new positioning, but since they executed at the ask price they suggest bullish intent.

Some unusual call activity (~276:1 over puts) is being seen in The RealReal (REAL -$0.16 to $1.50) as option traders focus on the November 18th 2.50 call. Volume on this contract is 30,028 (versus open interest of 31,652). The majority of the volume is coming from 2 block trades: 24,000 contracts traded at $0.05 and simultaneously, 6,000 contracts traded at $0.10 when the bid/ask spread was $0.05 x $0.15. Given the execution prices and the open interest, it seems likely that both of these were closing transactions.

Today’s Bearish Activity    

One of today’s biggest losers is CarMax (KMX -$12.44 to $74.00) after reporting fiscal Q2 EPS of $0.79, well below the $1.39 estimate, with revenues rising 2.0% y/o/y to $8.1B, south of the forecast of $8.5B. The auto dealer said total retail used unit sales declined 6.4% y/o/y and same-store sales fell 8.3%, citing a number of macroeconomic factors, such as vehicle affordability challenges that stem from widespread inflationary pressures, as well as climbing interest rates and low consumer confidence. Puts are outnumbering calls ~2:1, but the October 21st 82.50 call is leading the way (volume is 1,602).

Also moving lower today is Tesla (TSLA -$17.67 to $270.14) after receiving a price target downgrade from Piper Sandler to $340 from $360. Shares of the EV maker are -17% YTD and have been trading below the 50-day SMA for the past 5 sessions. Calls and puts are trading about even with the September 30th 270 put seeing the most activity (volume is 47,633).

New 52-week lows (127 new lows today): Abbott Labs (ABT -$1.10 to $97.62), Advanced Micro Devices (AMD -$3.50 to $64.82), Zillow (Z -$1.14 to $28.62), VF Corp (VFC -$1.32 to $31.33), UBS Group (UBS -$0.60 to $14.43), AT&T (T -$0.30 to $15.35), Oracle (ORCL -$1.31 to $61.77), JP Morgan Chase (JPM -$3.11 to $104.90), Citigroup (C -$1.24 to $42.14)

Notable Put Activity

Xerox Holdings (XRX -$1.03 to $13.48): A couple of large blocks were seen simultaneously trading as follows:

  • 10/21/2022 15.00 put (open interest of 8,313): A 5,000 contract block was sold at $1.80 when the bid/ask spread was $1.80 x $1.90.
  • 12/16/2022 11.00 put (open interest of 3): A 5,000 contract block was bought at $0.49 when the bid/ask spread was $0.35 x $0.50.

Given the execution prices and open interest levels, this appears to be a rollout and down trade; closing out a long position for October while simultaneously establishing a new long position for December. The positioning suggests that the block trader remains bearish on this name over the next 2 months.

Volume Signals

Brookdale Senior Living (BKD -$0.20 to $4.36): Option volume is running at ~10x the daily average on this operator of retirement communities which is being driven almost entirely by activity on the January 20th 5.00 call. Volume on this contract is 2,000 (versus open interest of 64), so we know that the volume primarily represents fresh positioning. The transactions on this contract consisted of various-sized trades that were all being bought at various times at the ask price of $0.35 each, which suggests bullish intent.

Vistra Energy (VST -$0.94 to $21.36): Option volume is running at ~3x the daily average on this integrated electric power company which is primarily due to the following 2 spreads that traded earlier this morning:

  • 10/21/2022 22.00 put (open interest of 5,518): A 50 contract block was bought at $1.30 when the bid/ask spread was $1.20 x $1.35, and then about 8 minutes later a 4,950 contract block was bought at $1.31 when the bid/ask spread was $1.20 x $1.35.
  • 1/20/2023 20.00 put (open interest of 861): A 50 contract block was sold at $1.17 when the bid/ask spread was $1.15 x $1.30, and then about 8 minutes later a 4,950 contract block was sold at $1.17 when the bid/ask spread was $1.10 x $1.30.

Given the execution prices and open interest levels, these appear to be rollout and down trades; closing out short positions for October while simultaneously establishing new short positions for January. The positioning suggests that the block trader remains bullish on this name over the next 3 months.

Gauging Volatility

The Cboe Volatility Index (VIX +2.75 to 32.94) has been higher all day (the intraday range is 31.16 - 33.46) as equity markets are sharply lower around the mid-day mark (DJI -529, SPX -86, COMPX -346). VIX option volume has been above average today at 241,590 contracts, which puts the index at the #8 spot on the “Top Volume by Underlying” list. The volume put/call ratio is very call-biased (0.24), with the highest volume contract being the December 21st 85.00 call (volume is 33,028 vs. open interest of 33,594).

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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