Today's Options Market Update

Nvidia's (NVDA) results and guidance easily exceeded Wall Street's consensus, capping a strong week so far in the tech sector. The cheerful news didn't lift Nvidia's shares much, and Wall Street's two-day rally showed signs of flagging early Thursday. The S&P 500 Index (SPX) appeared to lose steam as it approached the top of its near-term 6,800 to 7,000 trading range.

Salesforce (CRM) and Snowflake (SNOW) rounded out the tech trio in focus this morning, though these giant software firms also found that solid results weren't enough to push back on negative sentiment around their industry. Shifting to the economy, today's weekly initial jobless claims of 212,000 almost perfectly matched the Briefing.com consensus of 211,000 and stayed historically low, though hiring has also slowed over the past year. Tomorrow morning provides a fresh look at inflation, with analysts expecting 0.3% monthly growth for the January Producer Price Index (PPI). Annual PPI is seen at 3%, well above the Federal Reserve's 2% goal.

While Wednesday's session showed promise at the index level—the S&P 500 posted two-week highs and the Nasdaq soared—sector strength was less bountiful. The rally narrowed, with tech and financials far ahead and industrials and some other cyclical areas lagging. In trading today, the market might build in a bit more geopolitical risk as U.S. talks with Iran resume and the two sides appear far apart on Iran's nuclear program.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is lower by ~2 basis points to 4.023%.

The U.S. Dollar Index ($DXY) is higher by 0.14 to 97.84.

WTI Crude Oil (/CL) is higher by 1.13% to $66.16/barrel.

Gold prices have traded in a range of $5,144.80-5,221.90 and were last seen trading lower by ~0.52% to $5,199.20/oz.

Natural Gas prices for March futures have traded in a range of $2.775-2.891 today and were last seen trading lower by 2.44% to $2.798.

Bitcoin (BTC) is lower by ~1.38% over the last 24 hours to $67,044.18 today.

Shares of Salesforce Inc. (CRM + $6.98 to $198.73) are moving higher this morning after the cloud-based provider of customer relationship management software reported Q4 adjusted EPS of $3.81 ($0.76 beat) on revenue that increased 12% year-over-year to $11.20B (slightly above the $11.175B expected). Concurrent with the earnings release, the company announced a $50B share-repurchase program and increased its quarterly dividend by 5.8% to $0.44 per share. Looking ahead, the company guided Q1 adjusted EPS to a range of $3.11-3.13 on Q1 revenue that is expected to come in a range of $11.03-11.08B, which is above the respective $3.00 & $10.988B consensus estimates. Calls are outpacing puts ~2:1 with the February 27^th 200.00 call being the highest volume contract (volume is 11,371).

Also trading to the upside this morning is Spotify Technology S.A. (SPOT + $23.21 to $486.49) after Arete Research upgraded the music streaming provider to “Buy” from “Neutral” and put a $586.00 price target on the stock. Analysts at Arete Research see improving gross margins for the company’s premium service and believe the risk of AI disruption is minimal. Calls are outnumbering puts ~3:2 with the April 17^th 540.00 call being the highest volume contract (volume is 975).

New 52-week highs (155 new highs today): Atmos Energy Corp. (ATO + $0.71 to $182.77), Chubb Ltd. (CB + $1.19 to $335.73), Five Below Inc. (FIVE + $1.87 to $224.97)

Some unusual call activity (~5:1 calls over puts) is being seen in Dragonfly Inc. (DPRO - $1.40 to $6.76) as option traders primarily target the February 27^th 6.50 call. Volume on this contract is 2,104 versus open interest of 554, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $1.60-1.75 each, which suggests bullish intent.

Shares of Nvidia Corp. (NVDA - $7.63 to $187.93) are moving lower this morning even though the AI chip maker delivered another “beat & raise” quarter. Nvidia reported Q4 adjusted EPS of $1.62 ($0.08 beat) on Q4 revenue of $68.13B (above the $66.13B expected) as Q4 gross margins came in at 75% (in-line with estimates). The company also issued upside guidance as Q1 revenue is expected to be $78B, plus or minus 2%, versus expectations for $72.93B. Calls are outnumbering puts ~3:2 with the February 27^th 190.00 call being the highest volume contract (volume is 236,941).

Also trading to the downside today is Walker & Dunlop Inc. (WD - $10.55 to $48.36) after the provider of multifamily and commercial real estate financing products posted Q4 adjusted EPS of $0.28 ($0.95 miss) on Q4 revenue of $340.024M (below the $343.663M expected). Shares of WD are trading at the lowest levels since 2020 this morning. Option volume is relatively light with the March 20^th 45.00 call being the highest volume contract (volume is 8).

New 52-week lows (64 new lows today): C3.AI Inc. (AI - $2.10 to $8.21), Harley-Davidson Inc. (HOG - $0.29 to $18.39), Novo Nordisk A/S (NVO - $0.63 to $37.53)

Some unusual put activity (~22:1 puts over calls) is being seen in Gates Industrial Corp. (GTES - $0.41 to $27.10) as option traders primarily target the March 20^th 26.00 put. Volume on this contract is 2,000 versus open interest of 8, so it’s likely that nearly all the volume represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought around the same time at the ask price of $0.50 each, which suggests bearish intent.

Natera Inc. (NTRA + $0.57 to $212.40): Option volume is running at ~66x the daily average on this provider of molecular testing services which is primarily being driven by a couple of large blocks that simultaneously traded on the March 20^th expiration earlier this morning:

• 200.00 put (open interest is 55): A 1,990 contract block was bought for $7.75 when the bid/ask spread was $6.30 x $8.60.
• 175.00 put (open interest is 189): A 1,990 contract block was sold for $2.70 when the bid/ask spread was $1.15 x $3.90.

We know that these blocks are new positions based on the respective open interest figures, and it appears that a $25.00-wide bear put spread was established for a net debit of $5.05 (x 1,990 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that NTRA will close below the break-even price of $194.95 at expiration.

Sprout Social Inc. (SPT + $0.28 to $7.04): Option volume is running at ~26x the daily average on this social media platform as option traders primarily target the March 20^th 7.50 call. Volume on this contract is 3,251 versus open interest of 1,348, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.55-0.60 each, which suggests bullish intent.

Eaton Corp. PLC (ETN - $5.79 to $367.74): Option volume is running at ~20x the daily average on this power management company which is primarily being driven by a couple of large blocks that simultaneously traded on the March 27^th expiration earlier this morning:

• 390.00 call (open interest is 15): A 20,000 contract block was bought at the ask price of $5.70.
• 415.00 call (open interest is 3): A 20,000 contract block traded for $2.05 when the bid/ask spread was $0.40 x $3.20.

We know that these blocks are new positions based on the respective open interest figures, and it appears (since the block trade on the 390 call took place at the ask price) that a $25.00-wide bull call spread was established for a net debit of $3.65 (x 20K contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that ETN will close above the break-even price of $393.65 at expiration.

The Cboe Volatility Index (VIX + 2.24 to 20.17) has been on both sides of the unchanged line today (the intraday range is 17.50-20.54), as equity markets are lower across the board around the midday mark (DJI - 221, SPX - 77, $COMP - 425). VIX option volume is average today at 320,298 contracts, and calls are outnumbering puts ~3:2 so far today.