Today's Options Market Update

Equities continue their post-Fed rally.

U.S. stocks are continuing yesterday's rally that came as the Fed hiked rates by a decelerated amount and suggested that it may be nearing the end of its tightening cycle. The global markets are also reacting to 50-basis point rate hikes from the European Central Bank and Bank of England. Earnings continue to pour in, with Meta Platform jumping after its results and Eli Lilly and Company seeing pressure after its release. The economic calendar delivered some positive news, with Q4 productivity much stronger than expected and unit labor costs slowing more than anticipated. Jobless claims continued to slide, while factory orders missed estimates. Treasury yields are lower, and the U.S. dollar is gaining ground. Crude oil and gold prices are dipping. Asia finished mixed following the Fed's decision, and Europe is mostly higher in the wake of the monetary policy decisions in the region.

At 10:53 a.m. ET, the Dow Jones Industrial Average is dipping 0.1%, while the S&P 500 Index is rallying 1.6%, and the Nasdaq Composite is jumping 3.1%. WTI crude oil is edging $0.15 lower to $76.26 per barrel, and Brent crude oil is trading $0.71 lower to $82.13 per barrel. The gold spot price is down $2.00 to $1,940.80 per ounce, and the Dollar Index is advancing 0.3% to 101.57. Natural Gas prices have traded in a range of $2.450-2.560 and were last seen trading higher by $0.055 (or +2.23%) to $2.523/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Topping the big gainers list today is Meta Platforms (META + $28.51 to $181.86) after the social media giant reported Q4 EPS of $1.76, but it is unclear if that is comparable to the $2.26 estimate. Revenues declined 4.0% y/o/y to $32.17B, above the expected $31.55B. META issued Q1 revenue guidance with a midpoint slightly above projections, estimated that its restructuring charges will be below prior estimates and announced an additional $40B to its share repurchase program. Calls are outnumbering puts ~3:2 but the February 3rd 180.00 put is the highest volume contract (volume is 19,774).

Also moving higher today is Align Technology (ALGN + $69.37 to $351.89) after reporting Q4 earnings of $41.8M or $1.73 per share ex-items; ahead of the $1.52 estimate, on revenue of $901.5M; also ahead of the $889.3M estimate. The Invisalign tooth-straightening maker said demand for its clear aligners and interest in orthodontic treatments improved in Q4, partially helped by a weaker dollar and lower inflation, creating a slightly rosier picture for 2023 as a whole. Calls are outnumbering puts ~3:2 with the February 3rd 370.00 call being the highest volume contract (volume is 1,409).

 New 52-week highs (133 new highs today): Coty (COTY + $0.03 to $10.28), DR Horton (DHI + $1.51 to $101.41), Foot Locker (FL + $0.55 to $45.79)

Notable Call Activity

Some unusual call activity (~100:1 over puts) is being seen in ACV Auctions (ACVA + $0.44 to $10.75) as option traders primarily target the following 3 contracts:

  • 3/17/2023 12.50 calls (open interest is 983): volume is 580 contracts.
  • 2/17/2023 12.50 calls (open interest is 5,833): volume is 160 contracts.
  • 2/17/2023 10.00 calls (open interest is 5,538): volume is 320 contracts.

Based on the respective open interest levels, we can’t be certain whether these trades are buys or sells, and we can’t confirm whether or not they represent new positioning.

Today’s Bearish Activity

One of today’s biggest losers is Eli Lilly (LLY - $18.81 to $324.76) after reporting adjusted Q4 EPS of $2.09, versus the expected $1.78, with revenues declining 9.0% y/o/y to $7.30B, versus the estimated $7.33B. LLY raised its full-year earnings outlook and reaffirmed its revenue forecast. Puts are just slightly outnumbering calls today and the February 3rd 340.00 call is the highest volume contract (volume is 605).

Also falling is United Health Group (UNH - $15.04 to $481.96) though there is no specific news today to account for the drop. Shares of UNH are down about 12% in the past 60 days but they have traded mostly sideways since reporting Q4 earnings back on January 13th. Calls are outnumbering puts ~3:1 with the February 3rd 490.00 call being the highest volume contract (volume is 1,235).

New 52-week lows (3 new lows today): Centene (CNC - $2.16 to $72.98), FiscalNote Holdings (NOTE - $0.07 to $3.35)

Notable Put Activity

Some unusual put activity (~3:1 over calls) is being seen in Hanesbrands (HBI - $2.01 to $6.69) as option traders primarily target the following 2 contracts:

  • 2/24/2023 6.00 puts (open interest is 10): volume is 25,299 contracts.
  • 3/17/2023 8.00 puts (open interest is 13,124): volume is 10,204 contracts.

We can’t be certain whether these trades are buys or sells, but based on the open interest level, we can confirm that the activity on the 6.00 puts mostly represents new positioning.

Volume Signals

Championx Corp (CHX - $2.66 to $29.84): Option volume is running at ~70x the daily average on this provider of oil and gas drilling technologies which is primarily being driven by heavy volume on the April 21st 32.50 calls. Volume on this contract is 10,027 (versus open interest of 15,341), so we can’t be certain how much of this activity represents new positioning.

Paragon 28 Inc (FNA + $0.17 to $17.00): Option volume is running at ~25x the daily average on this medical device company which is entirely being driven by heavy volume on the February 17th 17.50 calls. Volume on this contract is 1,503 (versus open interest of 968), so we know that we have some new positioning here.

Gauging Volatility

The Cboe Volatility Index (VIX - 0.08 to 17.80) has been on both sides of the unchanged line today (the intraday range is 17.06-18.03) as equity markets are mixed around the mid-day mark (DJI - 127, SPX + 55, COMPX + 336). VIX option volume has been above average today and the index is currently 9th on the “Top Volume by Underlying” list. The volume put/call ratio is currently 0.37, with the highest volume contract being the February 15th 20.00 calls (volume is 31,954 vs. open interest of 76,852).

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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