Market Commentary | February 3, 2023

Today's Options Market Update

Stocks mixed as investors digest strong employment data, earnings.

U.S. equities are mixed following uninspiring earnings results from some mega-tech companies and a hot January labor report. Nonfarm payroll additions handily beat estimates, and the unemployment rate declined, solidifying the notion of a tight job market. Meanwhile, a read on domestic services sector activity moved back into expansion territory. Dow member Apple missed estimates and posted its first quarterly decline in revenues since 2019, Amazon and Alphabet also posted discouraging quarterly results, while Qualcomm bested EPS estimates by a penny, but fell short on the revenue side. Treasury yields are solidly higher following the labor data, and the U.S. dollar is trading to the upside, while crude oil prices are gaining ground in choppy action, and gold is plunging. Asia finished mixed, and Europe is also diverging as the markets continue to process the week's monetary policy decisions, as well as some services sector data across the globe.

At 10:53 a.m. ET, the Dow Jones Industrial Average is rising 0.1%, while the S&P 500 Index is declining 0.2%, and the Nasdaq Composite is ticking 0.1% lower. WTI crude oil is up $1.53 to $77.39 per barrel, and Brent crude oil is trading $1.80 higher to $83.97 per barrel. The gold spot price is tumbling $41.90 to $1,889.10 per ounce, and the Dollar Index is advancing 0.7% to 102.41. Natural Gas prices have traded in a range of $2.369-2.515 and were last seen trading lower by $0.082 (or - 3.34%) to $2.376/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Shares of The Clorox Company (CLX + $9.15 to $150.15) are gapping up to a year-to-date high this morning after the maker of cleaning products reported fiscal Q2 earnings of $0.98 per share, excluding non-recurring items ($0.32 beat) on revenue that rose 1.4% year-over-year (YoY) to $1.72B (above the $1.66B consensus estimate). Looking ahead, the company said that full-year 2023 (FY23) EPS is expected to come in a range of $4.05-4.30 (vs. the $4.11 consensus estimate and above the company’s prior guidance of $3.85-4.22) and FY23 revenue is expected to come in a range of -2.0% to +1.0% (vs. the company’s prior guidance of -4.0% to +2.0%). Calls are outnumbering puts ~2:1 with the February 3rd 160.00 call being the highest volume contract (volume is 1,073).

Also trading to the upside is Apple Inc. (AAPL + $4.83 to $155.65) even though the iPhone maker missed on both the top and bottom line in its latest quarterly earnings report. The company reported fiscal Q1 earnings of $1.88 per share, excluding non-recurring items ($0.07 miss) on revenue that fell 5.5% YoY to $117.15B (below the $121.67B consensus estimate). Q1 iPhone revenue came in at $65.8B (below the $69.0B expected), Q1 Mac revenue came in at $7.7B (below the $9.8B expected), Q1 wearable revenue came in at $13.5B (below the $15.1B expected) and Q1 Services revenue came in at $20.8B (in-line with estimates). Calls are outnumbering puts ~3:2 with the February 3rd 155.00 call seeing the most action from traders (volume is 115,978).

 

New 52-week highs (99 new highs today): Dillard’s Inc. (DDS + $6.15 to $412.90), Regeneron Pharmaceuticals Inc. (REGN + $30.35 to $781.55), W.W. Grainger Inc. (GWW + $2.55 to $678.12)

Notable Call Activity

Some unusual call activity (~50:1 over puts) is being seen in Carlyle Group Inc. (CG - $0.08 to $37.68) as option traders primarily target the March 17th 45.00 call. Volume on this contract is 2,103 versus open interest of 124, so we know that the volume primarily represents fresh positioning. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times at the ask price of $0.15 each, which suggests bullish intent.

Today’s Bearish Activity

Leading the point decliners list this morning is Bill.com Holdings Inc. (BILL - $32.89 to $96.02) after the business software provider beat quarterly estimates but provided disappointing guidance last night after the bell. The company reported fiscal Q2 earnings of $0.42 per share, excluding non-recurring items ($0.28 beat) on revenue that rose 66.1% YoY to $260M (above the $243.01M consensus estimate). Regarding guidance, the company said that Q3 EPS is expected to come in a range of $0.22-0.25 (above the $0.12 expected) on revenue that is expected to come in a range of $245-248M (below the $250.73M expected). Calls are slightly outnumbering puts with the February 17th 145.00 call being the highest volume contract (volume is 1,649).

Also trading to the downside is Amazon.com Inc. (AMZN - $5.94 to $106.97) after the e-commerce giant reported Q4 EPS of $0.03 ($0.14 miss) on Q4 revenue that increased 9% YoY to $149.2B (above the $145.8B expected) as Q4 Amazon Web Services net sales came in at $21.3B (below the $21.76B expected). Looking ahead, the company said that Q1 revenue is expected to come in a range of $121-126B versus the $125.11B consensus estimate. Calls are outnumbering puts ~2:1 with the February 3rd 110.00 call leading the way (volume is 36,165).

 

New 52-week lows (4 new lows today): Adara Acquisition Corp. (ADRA - $0.90 to $9.30), Allied Healthcare Inc. (AHPI - $0.26 to $0.29), MDxHealth SA (MDXH - $2.11 to $3.90)

Notable Put Activity

Some unusual put activity (~100:1 over calls) is being seen in Expeditors International of Washington Inc. (EXPD - $1.65 to $117.22) which is primarily being driven by activity on the February 17th 110.00 put. Volume on this contract is 1,003 versus open interest of 97, so we know that the volume primarily represents new positioning. The bulk of the transactions on this contract consisted of various small to mid-sized blocks that were being bought at various times for between $0.90-0.95 each, which suggests bearish intent.

Volume Signals

Old National Bancorp (ONB + $0.17 to $17.99): Option volume is running at nearly 40x the daily average on this financial services provider which is primarily being driven by activity on the September 15th 15.00 put. Volume on this contract is 2,086 versus open interest of 0, so we know that all of the volume represents fresh positioning (assuming no day trades). The bulk of the transactions on this contract consisted of various-sized blocks that were being sold at various times at the bid price of $0.30 each. The positioning suggests that the put seller(s) believe that ONB will close at or above the $15.00 price level and/or is comfortable taking a long position in the stock at an effective purchase price of $14.70 in the event that it closes below $15.00 at expiration.

Payoneer Global Inc. (PAYO - $0.07 to $6.13): Option volume is running at over 12x the daily average on this financial technology company which is primarily being driven by a 7,500 contract block that was sold on the January 2024 2.50 put for $0.10 when the bid/ask spread was $0.00 x $0.85 (open interest is 21). We know that this block is a new position based on the open interest figure and we can assume that the block trader believes that PAYO will close at or above the $2.50 price level and/or is comfortable taking a long position in the stock at an effective purchase price of $2.40 in the event that it closes below $2.50 at expiration.

Yext Inc. (YEXT + $0.31 to $8.03): Option volume is running at over 10x the daily average on this operator of a cloud-based platform that provides answers to consumer questions which is primarily being driven by activity on the February 17th 10.00 call. Volume on this contract is 5,776 versus open interest of 285, so we know that the volume primarily represents new positioning. The bulk of the activity consisted of various -sized blocks that were being bought at various times for between $0.20-0.40 each, which suggests bullish intent.

Gauging Volatility

The Cboe Volatility Index (VIX - 0.35 to 18.38) has been on both sides of the unchanged line today (the intraday range is 17.93-18.64) as equity markets are mixed around the mid-day mark (DJI + 96, SPX - 5, COMPX - 15). VIX option volume has been tepid today as the index is currently missing from the “Top Volume by Underlying” list. The volume put/call ratio is currently 0.40, with the highest volume contract being the February 15th 24.00 call (volume is 62,645 vs. open interest of 213,213).

Shares of C3 Ai Inc. (AI + $6.16 to $28.08) are up over 100% in 2023 and average implied volatility is at an all-time high of 183% this morning. 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.

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