Today's Options Market Update

With data and earnings mostly on hiatus ahead of Thursday's New Year's Day market closure, investors turn this afternoon to the one major agenda item on today's calendar: minutes from the Federal Reserve's most recent meeting. Stocks flattened early Tuesday ahead of the release, with the S&P 500 index now up 17% year-to-date and the Nasdaq 100 (NDX) up 21.5%. The two leading sectors for 2025 approaching year-end are communication services and information technology, with industrials third.

Getting back to the minutes, it's possible they'll provide clarity on why Fed officials expect to slow the pace of rate cuts in 2026 after cutting rates three times since September. The Fed's "dot plot" of rate projections featured a median estimate of just one cut next year, though Treasuries trading bakes in two to three. "The meeting minutes will likely show a range of opinions about the outlook for Fed policy," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research. "With inflation running above target and the labor market slowing but not falling off a cliff, the Fed will likely move at a slow pace cutting rates. We still expect one or two more cuts next year."

Major indexes dipped Monday in trading that was about 25% lighter than normal. One source of pressure was geopolitical tension in the Middle East and Taiwan that continued today. Info tech stocks ran into profit taking and materials stocks fell yesterday as silver and gold reversed their recent rallies. Treasury yields finished down more than 2 basis points for the benchmark 10-year note, below 4.12% and near recent lows. This was despite a stronger-than-expected November pending home sales report released Monday. The drop in metals prices might have fended off some inflation fears, boosting Treasuries.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is higher by ~1 basis points to 4.13%.

The U.S. Dollar Index ($DXY) is higher by 0.141 to 98.178.

WTI Crude Oil (/CL) is higher by 0.45% to $58.34/barrel.

Gold prices have traded in a range of $4,338.80-$4,420.50 and were last seen trading higher by ~0.83% to $4,379.60/oz.

Natural Gas prices have traded in a range of $3.916-4.176 today and were last seen trading higher by 1.76% to $4.056.

Bitcoin (BTC) is higher by ~1.89% to $88,894.97 today.

Shares of FTAI Aviation Ltd. (FTAI + $10.87 to $183.70) after the aerospace company said that it has launched the FTAI Power, which is a new platform focused on converting CFM56 aircraft engines to power turbines to help meet the energy demands of data centers. The company expects FTAI Power to have the capacity to deliver more than 100 units of CFM56 power turbines annually, with production expected to start in 2026. Calls are outpacing puts ~7:1 with the January 2^nd 190.00 call being the highest volume contract (volume is 439).

Also trading to the upside this morning is Meta Platforms Inc. (META + $9.56 to $668.25) following news that the social media giant has agreed to acquire Singapore-based AI start-up Manus for more than $2B, according to a Wall Street Journal report. The acquisition is expected to enhance Meta’s platform in the AI autonomous agent space. Meta’s Chief AI Officer Alexander Wang said that Manus is the top performing AI company on Scale AI’s Remote Labor Index. Calls are outnumbering puts nearly 3:1 with the January 2^nd 670.00 call leading the way (volume is 19,531).

New 52-week highs (38 new highs today): Alcoa Corp. (AA + $0.80 to $54.57), Exxon Mobil Corp. (XOM + $0.22 to $120.75), Micron Technology Inc. (MU + $1.38 to $295.75)

Some unusual call activity (~22:1 calls over puts) is being seen in Rocket Companies Inc. (RKT + $0.37 to $19.75) as option traders primarily target the February 20^th 23.00 call. Volume on this contract is 16,601 versus open interest of 313, 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 at various times for between $0.37-0.50 each, which suggests bullish intent.

Shares of Robinhood Markets Inc. (HOOD - $0.88 to $116.55) are trading modestly lower this morning after Needham cut their price target on the stock to $135.00 from $145.00, while maintaining their “Buy” rating. Analysts at Needham anticipate continued weakness in crypto volumes over the next couple quarters and lowered their estimates and price targets across the crypto asset sector as a result. Calls are outnumbering puts ~3:2 with the January 2^nd 120.00 call seeing the most action from traders (volume is 2,789).

New 52-week lows (128 new lows today): Cal-Maine Foods Inc. (CALM - $2.53 to $79.55), Masimo Corp. (MASI - $0.28 to $130.54), Pool Corp. (POOL + $0.74 to $230.07)

Some unusual put activity (~4:1 puts over calls) is being seen in Hewlett Packard Enterprise Co. (HPE - $0.08 to $24.25) as option traders primarily target the February 20^th 21.00 put. Volume on this contract is 5,002 versus open interest of 1,366, 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 $0.24 & $0.25 each, which suggests bearish intent.

Amcor PLC (AMCR - $0.02 to $8.43): Option volume is running at over 6x the daily average on this provider of packaging solutions which is primarily driven by a 1,490 contract block that was bought on the January 2028 10.00 call at the ask price of $0.80 (open interest is 372). We know that this block is a new position based on the open interest figure, and we can assume that the intent is bullish in nature since the trade took place at the ask price.

TKO Group Holdings Inc. (TKO - $1.81 to $214.30): Option volume is running at ~70x the daily average on this sports and entertainment company which is primarily being driven by some spread activity out on the April 2026 expiration:

• 210.00 put (open interest is 29): A 1,900 contract block was bought for $11.20 when the bid/ask spread was $9.50 x $12.50.
• 190.00 put (open interest is 20): A 2,380 contract block was sold for $4.80 when the bid/ask spread was $3.20 x $6.50.

We know that these blocks are new positions based on the respective open interest figures, and it appears that a $20.00-wide bear put spread was established (in a ~4:5 ratio) for a combined net debit of ~$5.19 (x 1,900 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that TKO will close below the break-even price of ~$204.81 at expiration.

Reddit Inc. (RDDT + $1.10 to $235.75): Option volume is running at ~3x the daily average on this social media firm which is primarily driven by a 10,000 contract block that was bought on the June 2028 150.00 put at the ask price of $37.85 (open interest is 3). We know that this block is a new position based on the open interest figure, and we can assume that the intent is bearish in nature since the trade took place at the ask price.

The Cboe Volatility Index (VIX + 0.04 to 14.24) has been on both sides of the unchanged line today (the intraday range is 14.04-14.62), as equity markets are modestly lower around the midday mark (DJI - 119, SPX - 6, $COMP - 16). VIX option volume is below average today at 234,011 contracts, and calls are outpacing puts ~6:1 so far today.