Today's Options Market Update

Stocks eased early, taking a breather after the best daily performance for major indexes since the Iran war began. The calendar is relatively featureless, so the session will likely be spent watching crude prices and mulling the latest war headlines. Crude rebounded more than 4% ahead of Wall Street's open, pushing stocks down further from mild overnight losses as investors saw little follow-up from yesterday's news of U.S. talks with Iran. Treasury yields fell Monday on signs of deescalation, but inched higher this morning.

"The longer oil prices stay elevated, the more likely there will be an inflation hit, and longer-term bond yields will stay high," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research (SCFR) "We believe the Fed will continue to remain on hold for the time being given the potential for higher inflation."

On Monday, major Wall Street indexes enjoyed a relief rally, the first higher daily close for the S&P 500 Index since last Tuesday. It's still down four weeks in a row and off roughly 4% this month. The market finished well below early highs, possibly suggesting skepticism about Trump's posts and concern around Iran's denials that talks were taking place. Details remain hazy, and the Strait of Hormuz is still shut this morning to all but a few Indian-flagged vessels, Reuters reported. The 30-year Treasury note yield hit its highest level since last September as yields extended gains early today after the U.S. reported that fourth quarter unit labor costs rose 4.4%, above the previous estimate of 3.1%. Productivity growth got revised down to 1.8% from the prior 2.5%. Neither is positive for yields or the Federal Reserve's rate path, though no single report is a trend.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is higher by ~4 basis point to 4.372%.

The U.S. Dollar Index ($DXY) is higher by 0.38 to 99.33.

WTI Crude Oil (/CL) is higher by 4.35% to $91.96/barrel.

Gold prices have traded in a range of $4,337.70-4,482.30 and were last seen trading lower by ~0.20% to $4,448.20/oz.

Natural Gas prices for March futures have traded in a range of $2.886-2.953 today and were last seen trading higher by 1.07% to $2.922.

Bitcoin (BTC) is lower by ~1.62% over the last 24 hours to $69,748.90 today.

Shares of Jefferies Financial Group Inc. (JEF + $1.51 to $41.06) are moving higher this morning following a Financial Times report that Japan’s Sumitomo Mitsui Financial Group (SMFG) is considering a takeover of the U.S. investment bank. Neither Jefferies nor SMFG responded to a request for comment earlier this morning, but SMFG initially took a 5% stake in JEF in 2021 and agreed to increase that stake by up to 20% last year, according to a joint statement by both companies. Puts are outnumbering calls ~3:1 with the July 17^th 30.00 put being the highest volume contract (volume is 401).

Also trading to the upside this morning is Ralph Lauren Corp. (RL + $3.65 to $342.76) after Citigroup upgraded the apparel maker to “Buy” from “Neutral” and increased their price target on the stock to $400.00 from $360.00. Analysts at Citigroup believe the company is set to report a fiscal Q4 beat and feel the recent sell-off in the stock offers an attractive buying opportunity. Option volume is relatively light with the April 17^th 390.00 call leading the way (volume is 13).

New 52-week highs (69 new highs today): Ciena Corp. (CIEN + $19.75 to $427.65), Phillips 66 (PSX + $5.45 to $182.21), Verizon Communications Inc. (VZ + $0.80 to $51.38)

Some unusual call activity (~90:1 calls over puts) is being seen in furniture maker The Lovesac Company (LOVE + $1.21 to $12.21) which is primarily being driven by activity on the April 17^th 12.50 call. Volume on this contract is 2,671 versus open interest of 178, 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 at the ask prices of $0.80 & 0.85 each, which suggests bullish intent. LOVE is scheduled to report Q4 earnings on Thursday (March 26^th) before the bell, so this positioning captures the potential impact of that event.

Shares of Apollo Global Management Inc. (APO - $1.87 to $108.58) are moving lower this morning following news that the company capped investor withdrawals from its flagship private cred fund, Apollo Debt Solutions BDC. Reports suggested that the fund was capping redemptions at 5%, which is less than half of the redemption requests from investors. Calls are slightly outnumbering puts, but the March 27^th 105.00 put is the highest volume contract (volume is 2,878).

Also trading to the downside is SAP SE (SAP - $7.36 to $170.80) after JPMorgan downgraded the software firm to “Neutral” from “Overweight” and cut their price target on the stock to €175.00 from €260.00. Analysts at JPMorgan cited slowing cloud backlog growth and higher uncertainty related to the company’s new strategic shifts. Puts are outnumbering calls ~5:4 with the March 27^th 167.50 put seeing the most action from traders (volume is 844).

New 52-week lows (138 new lows today): Abbott Laboratories Inc. (ABT - $1.59 to $103.26), Chemed Inc. (CHE - $1.42 to $372.00), Domino’s Pizza Inc. (DPZ - $3.98 to $362.82)

Some unusual put activity (~30:1 puts over calls) is being seen in Cadence Design Systems Inc. (CDNS - $6.89 to $285.63) which is primarily being driven by a couple of large blocks that simultaneously traded on the June 18^th expiration earlier this morning:

• 290.00 put (open interest is 1,305): A 5,000 contract block was sold for $28.96 when the bid/ask spread was $27.90 x $30.80.
• 265.00 put (open interest is 0): A 10,000 contract block was bought for $17.41 when the bid/ask spread was $15.60 x $18.80.

We know that both these blocks are new positions based on the respective open interest figures, and it appears that a (bearish) put back spread was established for a net debit of $6.13 (x 5,000 contracts x 100 multiplier, excluding commissions). This ratio spread is typically established when the view is highly bearish, and in this example suggests that the block trader believes that CDNS will close below the break-even price of $233.87 at expiration.

Energy Recovery Inc. (ERII + $0.27 to $10.39): Option volume is running at ~31x the daily average on this provider of energy efficient technology solutions which is primarily driven by activity on the April 17^th 12.50 call. Volume on this contract is 2,173 versus open interest of 578, so we know that the volume primarily represents fresh positioning. The majority of the transactions consisted of various-sized blocks that were bought around the same time at the ask price of $0.10 each, which suggests bullish intent.

Urban Outfitters Inc. (URBN + $1.02 to $62.77): Option volume is running at ~24x the daily average on this retailer which is primarily being driven by a couple of large blocks that simultaneously traded on the April 10^th expiration earlier this morning:

• 65.00 call (open interest is 0): A 2,790 contract block was bought for $1.45 when the bid/ask spread was $1.25 x $1.50.
• 70.00 call (open interest is 2): A 2,790 contract block was sold for $0.37 when the bid/ask spread was $0.30 x $0.45.

We know that both these blocks are new positions based on the respective open interest figures, and it appears that a $5.00-wide bull call spread was established for a net debit of $1.08 (x 2,790 contracts x 100 multiplier, excluding commissions). If so, the positioning would suggest that the block trader believes that URBN will close above the break-even price of $66.08 at expiration.

GlobalFoundries Inc. (GFS + $2.27 to $46.23): Option volume is running at ~11x the daily average on this semiconductor foundry company as option traders primarily target the May 15^th 55.00 call. Volume on this contract is 4,381 versus open interest of 36, so it’s likely that nearly all the volume represents fresh positioning. The majority of the transactions consisted of various mid-sized blocks that were bought at various times for between $1.05-1.70 each, which suggests bullish intent.

The Cboe Volatility Index (VIX + 0.11 to 26.26) has been on both sides of the unchanged line today (the intraday range is 25.64-27.94), as equity markets are mixed around the midday mark (DJI + 126, SPX + 2, $COMP - 100). VIX option volume is above average today at 488,076 contracts, and calls are outnumbering puts ~4:1 so far today.