Market Commentary | June 15, 2021

Today's Options Market Update

Stocks tentative ahead of tomorrow’s Fed policy statement.

U.S. equities are lower in midday action following a slew of mixed economic data, and as investors await tomorrow's monetary policy decision from the Fed. The economic calendar undeniably came alive today, with retail sales missing forecasts, but the prior month's figures were revised noticeably higher, wholesale prices came in hotter than expected, and  manufacturing activity in the New York region slowed, but remained comfortably in expansion territory. Meanwhile, industrial production continued to improve, homebuilder sentiment cooled, and business inventories ticked lower. In another light day on the equity front, Boeing and Airbus are in focus after the U.S. and European Union agreed to resolve their long-standing dispute surrounding aircraft tariffs. Treasuries are dipping to lift yields, and the U.S. dollar is little changed, while gold has turned lower and crude oil prices are adding to a recent run. Asia finished mixed with markets coming back online from yesterday's holidays, while Europe is also diverging in cautious trading.

At 10:44 a.m. ET, the Dow Jones Industrial Average is down 0.4%, the S&P 500 Index is dipping 0.3%, while the Nasdaq Composite is declining 0.6%. WTI crude oil is increasing $0.84 to $71.72 per barrel, Brent crude oil is rising $0.78 to $73.64 per barrel. The Bloomberg gold spot price is trading $6.50 lower to $1,859.68 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is nearly flat at 90.54. Natural Gas prices have traded in a range of $3.302-3.369 and were last seen trading lower by $0.045 (or -1.34%) to $3.307/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Leading the percentage gainers list this morning is Clearside Biomedical Inc. (CLSD + $1.28 to $4.30) after the drug developer said that the lowest dose of its wet age-related macular degeneration treatment (CLS-AX), delivered via injection, was well-tolerated with no treatment-related adverse events in an early-stage trial. The company expects to begin another study using a higher dose of CLS-AX (0.1 mg) this month. Calls are outpacing puts roughly 12:1 with the June 18th 5.00 call topping the most actives list (volume is 5,714).

A couple of stocks are moving higher this morning following analyst upgrades:

  • Finance of America Companies Inc. (FOA + $1.05 to $8.35): Raymond James upgraded the vertically integrated consumer lending platform to “Strong Buy” from “Outperform” and put a $13.50 price target on the stock. Calls are outnumbering puts roughly 10:1 with the July 16th 10.00 call being the most actively traded contract (volume is 1,142).
  • Welltower Inc. (WELL + $0.81 to $82.02): Raymond James “double upgraded” the developer and operator of senior living facilities to “Strong Buy” from “Market Perform” and put a $92.00 price target on the stock. Separately, Baird raised their price target on the stock to $86 from $79 and BMO raised their price target on the stock to $80 from $76. Calls are outnumbering puts roughly 5:1 with the June 18th 85.00 call garnering the most attention from traders (volume is 483).

 

New 52-week highs (137 new highs today): Analog Devices Inc. (ADI - $0.46 to $167.98), Nutanix Inc. (NTNX + $0.40 to $37.91), Pepsico Inc. (PEP + $0.08 to $148.65)

Notable Call Activity

Some unusual call activity (25:1 over puts) is being seen in Intel Corp. (INTC - $0.25 to $57.94) as option traders primarily target the June 25th 62.00 call. Volume on this contract is 41,740 versus open interest of 1,993, so we know that this primarily represents new positioning. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $0.14 and $0.21 each, which suggests bullish intent.  

Today’s Bearish Activity    

Shares of Sage Therapeutics Inc. (SAGE - $11.27 to $61.59) are under pressure after the drug developer (along with partner Biogen) announced results from a pivotal Phase 3 study of its treatment for major depressive disorder (MDD) Zuranolone. The company said that 50 mg of Zuranolone demonstrated statistically significant improvement in depressive symptoms vs. the placebo at Day 15 as assessed by the 17-item Hamilton Rating Scale for Depression. Regarding the drop in the stock, Guggenheim analyst Yatin Suneja noted that while the results were good enough for approval, there are concerns about the clinical significance. SAGE puts are outpacing calls roughly 5:2 with the June 18th 65.00 put being the most actively traded contract (volume is 1,790).

Also trading to the downside is Draftkings Inc. (DKNG - $2.62 to $48.00) following news that short-selling firm Hindenburg Research has taken a short position in the online gaming company. Commenting on the move, the firm stated, “We think Draftkings has systematically skirted the law and taken elaborate steps to obfuscate its black market operations.” DKNG average implied volatility is up 10 ticks this morning (from 54% to 64%). Calls are outnumbering puts roughly 5:2 with the June 18th 50.00 call topping the most actives list (volume is 39,262). 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.  

 

New 52-week lows (7 new low): Autohome Inc. (ATHM - $2.04 to $68.04), Proto Labs Inc. (PRLB - $1.79 to $85.52), Vertex Pharmaceuticals Inc. (VRTX - $2.75 to $192.05)

Notable Put Activity  

Some unusual put activity (~5:1 over calls) is being seen in the SPDR S&P Retail ETF (XRT - $2.41 to $93.42) which is primarily being driven by activity on two contracts on the July 16th expiration:

  • 94.00 put (open interest is 250): The activity included a 2,000 contract block was bought for $2.95 when the bid/ask spread was $2.91 x $2.98.
  • 84.00 put (open interest is 1,385): A 2,000 contract block was sold for $0.50 when the bid/ask spread was $0.49 x $0.54.

We know these blocks are new positions based on the respective open interest figures and it appears that a $10.00-wide bear put spread was established for a net debit of $2.45 (x 2,000 contracts x 100 multiplier, excluding commissions) which suggests that the block trader believes that XRT will close below the break-even price of $91.55 at expiration.

Tanger Factory Outlet Inc. (SKT - $0.89 to $18.41): Puts are outpacing calls roughly 100:1 which is primarily being driven by activity on the September 17th 19.00 put. Volume on this contract is 8,414 versus open interest of 2,926, so we know that this primarily represents new positioning. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $2.59 and $2.65 each (including a 3,804 contract block that was bought for $2.65 when the bid/ask spread was $2.13 x $2.75), which suggests bearish intent.  

The Macerich Co. (MAC - $0.23 to $17.20): A 10K contract block was bought on the September 17th 17.00 put for $2.15 when the bid/ask spread was $1.80 x $2.20 (open interest is 560). We know that this block is a new position based on the open interest figure and we can assume the intent is bearish in nature since the trade took place above the midpoint of the bid/ask spread.

Volume Signals       

SPDR Select Sector Financial ETF (XLF - $0.15 to $37.01): The 3rd most actively traded option contract in the market today is the XLF 6/25/2021 38.00 call as volume is 79,268 versus open interest of 3,713 (suggesting 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 for between $0.15 and $0.17 each, which suggests bullish intent.

Facebook Inc. (FB - $0.42 to $336.35): The 2nd most actively traded option contract in the market today is the FB 6/18/2021 340.00 call as volume is 69,913 versus open interest of 16,980 (suggesting that this primarily represents new positioning). The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $1.70 and $2.20 each, which suggests bullish intent. Note: shares of FB hit an all-time high of $339.92 earlier in the trading session.

NOV Inc. (NOV + $0.50 to $17.31): Option volume is running at roughly 25x the daily average of 383 contracts which is primarily being driven by activity on the July 9th 18.00 call. Volume on this contract is 11,212 versus open interest of 20, so it’s likely that this is all new positioning. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $0.55 and $0.65 each, which suggests bullish intent.  

At Home Group Inc. (HOME - $0.39 to $35.71): Option volume is running at roughly 9x the daily average of 3,530 contracts which is primarily being driven by activity on the June 18th 35.00 put. Volume on this contract is 19,469 versus open interest of 1,978, so we know that this primarily represents new positioning. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $0.25 and $0.40 each, which suggests bearish intent.

Gauging Volatility

CBOE Volatility Index (VIX + 0.58 to 16.97) has been on both sides of the unchanged line today (the intraday range is 16.14-17.35) as equity markets are lower around the mid-day mark today (DJI - 144, SPX - 10, COMPX - 86). VIX option volume has been slightly above average today at 354,731 contracts (#7 on the top 10 most actives list). The most actively traded contract is the June 16th 16.00 put as volume is 48,995 versus open interest of 161,298.   

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

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