Today's Options Market Update

Stocks are under pressure in midday action, continuing a rocky start to the new year. Yesterday saw a wild trading day as markets plunged as much as 4% before traders began buying at discounted prices, and the market reversed to finish in the green. The Fed is kicking off its two-day monetary policy meeting today, and although they are not expected to raise rates this week, rate hikes are expected later this year. Investors remain extra cautious regarding the impact that rising rates may have on the economy. Earnings season is heating up this week as Dow members IBM, 3M, American Express, and Johnson & Johnson all reported earnings above forecasts today, but Johnson & Johnson's revenue was lower than expected. In economic news, home prices rose more than expected in November, while consumer confidence declined, and regional manufacturing was worse than expected. Treasuries are dipping as yields are ticking higher, the U.S. dollar is gaining ground, and crude oil and gold are rising. Europe is seeing widespread gains, and Asia finished mixed.

At 10:55 a.m. ET, the Dow Jones Industrial Average is down 1.0%, the S&P 500 is dropping 1.4%, and the Nasdaq Composite is falling 1.8%. WTI crude oil is increasing $1.23 to $84.54 per barrel, Brent crude oil is rising $1.05 at $87.32 per barrel. The gold spot price is $4.20 higher to $1,845.90 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is advancing 0.3% to 96.19. Natural Gas prices have traded in a range of $3.889-4.012 and were last seen trading lower by $0.066 (or -1.59%) to $3.963/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Multiple names are moving higher following upbeat earnings announcements:

• American Express Co. (AXP + $6.25 to $165.18): The credit card company reported Q4 earnings of $2.18 per share, excluding non-recurring items ($0.34 beat) on revenue that increased 29.9% year-over-year to $12.15B (above the $11.55B expected). Looking ahead, the company said that fiscal-year 2022 EPS is expected to come in a range of $9.25-9.65 on revenue is expected to increase 18-20% year-over-year. Today’s ~5% jump puts shares of AXP above the 200-day Simple Moving Average (SMA) of $165.78. Calls are outnumbering puts roughly 3:2 with the January 28^th 170.00 call topping the most actives list (volume is 4,336).
• IBM Corp. (IBM + $3.11 to $131.93): The provider of integrated IT solutions and services company reported Q4 earnings of $3.35 per share, excluding non-recurring items ($0.06 beat) on revenue that rose 6.5% year-over-year to $16.70B (above the $15.96B expected). The company’s consulting revenue was up 13%, hybrid cloud revenue increased 16% to $6.2B, software revenue up 8.2% and Red Hat revenue up 19% (all year/year). Calls and puts are trading roughly even with the January 28^th 135.00 call being the most actively traded contract (volume is 6,971).
• Logitech International S.A. (LOGI + $2.20 to $76.65): The maker of innovative gaming technologies and gear reported fiscal Q3 earnings of $1.55 per share ($0.49 beat) on revenue that fell 2.1% year-over-year to $1.63B (above the $1.45B expected). Looking ahead, the company raised its fiscal-year 2022 (FY22) revenue guidance to +2-5% year/year (from a prior expectation of flat revenue growth) and raised its FY22 non-GAAP operating income to a range of $850-900M year/year (from a prior view of $800-850M). Puts are outnumbering calls better than 4:1 with the March 18^th 75.00 put seeing the most action from traders (volume is 4,848).

New 52-week highs (4 new highs today): Allscripts Healthcare Solutions Inc. (MDRX + $2.49 to $19.97), Hope Bancorp Inc. (HOPE + $1.46 to $17.11), Sierra Oncology Inc. (SRRA + $6.54 to $22.05)

Notable Call Activity

Some unusual call activity (~100:1 over puts) is being seen in Exelixis Inc. (EXEL - $0.29 to $18.23) as option traders primarily target the August 19^th 19.00 call. Volume on this contract is 2,204 versus open interest of 1, so it’s likely that this is nearly all new positioning. The bulk of the transactions on this contract consisted of various mid-sized blocks that were being bought around the same time at the ask price of $2.40, which suggests bullish intent.  

Today’s Bearish Activity    

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

• General Electric Co. (GE - $6.87 to $90.04): The industrial conglomerate reported Q4 earnings of $0.92 per share, excluding non-recurring items ($0.10 beat) on revenue that fell 7.4% year-over-year to $20.3B (below the $21.32B consensus estimate). The company issued downside guidance as FY22 EPS is expected to come in a range of $2.80-3.50 (below the $4.00 consensus estimate) with FY22 organic revenue expected to grow in the “high-single-digit range” and adjusted organic profit margins expected to expand by 150+ basis points. Puts are outnumbering calls ~3:2 with the January 28^th 88.00 put being the most actively traded contract (volume is 5,138).
• 3M Co. (MMM - $2.48 to $170.32): The industrial giant reported Q4 earnings of $2.31 per share ($0.30 beat) on revenue that increased 0.3% year-over-year to $8.61B (above the $8.58B consensus estimate). Shares of MMM hit a 52-week low of $168.01 earlier in the trading session. Calls are outnumbering puts ~3:2 with the January 28^th 180.00 call seeing the most action from traders (volume is 993).
• Verizon Communications Inc. (VZ - $0.39 to $52.57): The telecommunications giant reported Q4 earnings of $1.31 per diluted share, excluding non-recurring items ($0.03 beat) on revenue that increased 1.8% year-over-year to $34.1B (above the $33.98B consensus estimate) as total wireless service revenue increased 6.5% year-over-year to $17.8B. The company issued upside guidance as FY22 EPS is expected to come in a range of $5.40-5.55 (above the $5.39 consensus estimates) with FY22 organic service and other revenue growth expected to be ~3% and reported wireless service revenue growth of 9-10%. Calls are outnumbering puts ~5:4 but the January 28^th 45.00 put is the most actively traded contract (volume is 4,818).

New 52-week lows (52 new lows today): Credit Suisse Group ADR (CS - $0.28 to $8.96), Nevro Corp. (NVRO - $2.02 to $69.48), Unifirst Corp. (UNF - $7.36 to $186.22)

Notable Put Activity

Some unusual put activity (~36:1 over calls) is being seen in the SPDR Select Sector Industrial ETF (XLI - $2.42 to $99.36) as the top nine most actively traded contracts are puts. Topping the most actives list is the February 18^th 91.00 put as volume is 5,592 versus open interest of 63, so it’s likely that this is nearly all new positioning. The bulk of the transactions consisted of various mid-sized blocks that were being bought around the same time for anywhere between $0.97 and $1.10 each, which suggests bearish intent.  

Volume Signals

Proterra Inc. (PTRA - $0.47 to $7.12): Option volume is running at over 2x the daily average on this maker of commercial vehicle electrification technology which is primarily being driven by activity on the March 18^th 10.00 call. Volume on this contract is 5,002 versus open interest of 129, so it’s likely that this is nearly all new positioning. The bulk of the activity consisted of various-sized blocks that were being bought at various times at the ask price of $0.35 each, which suggests bullish intent.

Indie Semiconductor Inc. (INDI - $0.28 to $7.07): Option volume is running at ~2x the daily average on this maker of automotive semiconductors and software solutions which is primarily being driven by activity on the March 18^th 10.00 call. Volume on this contract is 5,032 versus open interest of 64, so it’s likely that this is nearly all new positioning. The bulk of the activity consisted of various-sized blocks that were being bought at various times at the ask price of $0.25 each, which suggests bullish intent.

Invesco CurrencyShares Euro Currency Trust (FXE - $0.33 to $105.08): Option volume is running above average on this fund which is primarily being driven by activity on the June 17^th 103.00 put. Volume on this contract is 3,362 versus open interest of 71, so it’s likely that this is nearly all new positioning. The bulk of the activity consisted of various-sized blocks that were being bought at various times at the ask price of $1.00 each, which suggests bearish intent.

Gauging Volatility

The CBOE Volatility Index (VIX + 2.44 to 32.34) has been in positive territory all day today (the intraday range is 31.47-35.85) as equity markets are lower across the board around the mid-day mark (DJI - 350, SPX - 80, COMPX - 367). VIX option volume has been heavy today at 545,795 contracts, which puts the index at the #4 spot on the top 10 most actives list. Today’s activity has been call-biased (the volume put/call ratio is currently 0.80) and the most actively traded contract is the March 15^th 70.00 call as volume is 72,727 versus open interest of 86,247.

Shares of Amazon.com Inc. (AMZN - $116.28 to $2,774.60) are down over 16% in 2022 and average implied volatility is up 19 ticks this year (from ~27% to the current 46% level). Part of the IV move higher is likely due to the fact that Amazon is scheduled to report Q4 earnings next Thursday (February 3^rd) after the bell. 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.      

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.