Today's Options Market Update

June 2, 2023 Nathan Peterson
Stocks are pushing higher as Washington comes to terms on a debt deal and May's Nonfarm Payrolls report showed continued labor market strength.

The debt ceiling fight is over and May jobs data are in. The U.S. economy created a massive 339,000 jobs last month as the labor market showed no signs of slowing down

The market breathed a sigh of relief and stock index futures climbed overnight after the Senate approved legislation last night that will suspend the debt ceiling until 2025.

It then sent the measure to President Biden for his signature, beating a June 5 deadline to avoid a default. The 63–36 Senate vote came one day after an overwhelming 314–117 vote in the House of Representatives on the bill. President Biden plans to sign the bill into law today. The Treasury immediately would be able to begin borrowing and the debt ceiling debate will recede into the background until 2025.

The votes bring an end to weeks of anxiety on Capitol Hill and the markets over when and whether the bitterly divided Congress would find consensus on a debt ceiling bill.

The 10-year Treasury note yield ($TNX) was up ~7 basis points to 3.68%. The U.S. Dollar Index ($DXY) is down slightly to 104.04, though near two-month highs. The Cboe Volatility Index® ($VIX) is falling to a 52-week low and was last seen down by 0.85 to 14.85. WTI Crude Oil (/CL) is up sharply to $71.87 per barrel. Gold prices have traded in a range of $1,977.50 to $2,000.50 and were last seen trading lower by 0.74% to $1,980.80. Natural Gas prices have traded in a range of $2.138-2.233 so far today and were last seen trading higher by $0.061 (or + 2.83%) to $2.219/MMBtu.

Source: Schwab Market Update

Today's Bullish Activity

Leading the point gainers list this morning is MongoDB Inc. (MDB + $88.65 to $382.60) after the general purpose database platform provider reported Q1 earnings of $0.56 per share, excluding non-recurring items ($0.38 beat) on revenue that rose 29.0% year-over-year to $368.28M (above the $347.77M consensus estimate). The company also issued upbeat guidance as Q2 EPS is expected to come in a range of $0.43-0.46 on Q2 revenue that is expected to come in a range of $388-392M versus the respective $0.14 & $360.76M consensus estimates. Puts are outnumbering calls ~3:2 with the June 2nd 372.50 put seeing the most action from traders (volume is 1,740).

Also trading to the upside this morning is Broadcom Inc. (AVGO + $25.23 to $815.18) after the chip maker reported fiscal Q2 earnings of $10.32 per share, excluding non-recurring items ($0.20 beat) on revenue that rose 7.8% year-over-year to $8.73B (above the $8.70B consensus estimate). Looking ahead, the company said that Q3 revenue is expected to be approximately $8.85B (above the $8.71B consensus estimate). Calls are outpacing puts nearly 3:1 with the June 2nd 850.00 call leading the way (volume is 7,551).

New 52-week highs (91 new highs today): Apple Inc. (AAPL + $0.19 to $180.28), HubSpot Inc. (HUBS + $10.73 to $528.52), Microsoft Corp. (MSFT + $1.73 to $334.31)

Notable Call Activity

Some unusual call activity (~11:1 over puts) is being seen in ProShares UltraPro Dow 30 ETF (UDOW + $3.05 to $56.79) as option traders primarily target the June 16th 55.00 call. Volume on this contract is 2,455 (vs. open interest of 2,736), which included a 1,000 contract block that was bought at the ask price of $2.10. However, we can't be sure that this block trade is a new (bullish) position given the open interest figure.

Today's Bearish Activity

Shares of SentinelOne Inc. (S - $7.66 to $13.06) are under pressure this morning after the cybersecurity company reported a Q1 loss of $0.15 per share, excluding non-recurring items ($0.02 beat) on revenue that rose 70.5% year-over-year to $133.39M (below the $136.62M consensus estimate). Looking ahead, the company said that Q2 revenue is expected to be $141M (below the $147.68M consensus estimate) and lowered its full-year 2024 revenue guidance to a range of $590-600M (from $631-640M). Calls are outnumbering puts ~2:1 with the June 16th 15.00 call being the highest volume contract (volume is 2,869).

Also trading to the downside today is Cooper Companies Inc. (COO - $14.10 to $360.09) after the contact lens maker reported Q2 earnings of $3.08 per share ($0.04 beat) on revenue that rose 5.7% year-over-year to $877.4M (above the $865.81M expected). Looking ahead, the company said that full-year 2023 EPS is expected to come in a range of $12.66-12.96 and FY23 revenue is expected to come in a range of $3.512-3.569B versus the respective $12.78 & $3.55B consensus estimates. Puts are outnumbering calls ~2:1 with the June 16th 370.00 put being the highest volume contract (volume is 144).

New 52-week lows (25 new lows today): Advanced Auto Parts Inc. (AAP - $0.71 to $67.32), Tandem Diabetes Care Inc. (TNDM - $0.36 to $24.20), Verizon Communications Inc. (VZ - $1.79 to $33.93)

Notable Put Activity

Some unusual put activity is being seen in the iShares 20+ Year Treasury Bond ETF (TLT - $0.90 to $102.22) as option traders primarily target the June 16th 95.00 put. Volume on this contract is 40,657 versus open interest of 21,715, so we know that we have some fresh positioning here. The activity included a 9,729 contract block that was bought for $0.35 when the bid/ask spread was $0.32 x $0.35. It's likely that this block is a new (bearish) position given the expiration date, but we can't be sure given the open interest figure.

Volume Signals

Life Storage Inc. (LSI + $1.98 to $128.52): Option volume is running at over 32x the daily average on this storage REIT which is primarily being driven by activity on the June 16th 120.00 put. Volume on this contract is 1,015 versus open interest of 52, so it's likely that nearly all of the volume represents fresh positioning. 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 $0.45 each. The positioning suggests that the put seller(s) believe that LSI will close at or above the $120.00 price level and/or is comfortable taking a long position in the stock at an effective purchase price of $119.55 in the event that LSI closes below $120.00 at expiration.

SPDR Communications Select Sector Fund (XLC + $0.3 to $63.11): Option volume is running at over 3x the daily average on this fund which is primarily being driven by a couple of large blocks that simultaneously traded on the January 2024 expiration earlier this morning:

  • 65.00 call (open interest is 4,749): A 7,000 contract block was sold for $4.23 when the bid/ask spread was $4.10 x $4.40.
  • 78.00 call (open interest is 3): A 7,000 contract block was bought for $0.38 when the bid/ask spread was $0.30 x $0.45.

We know that both of these blocks are new positions based on the respective open interest figures and it appears that a $13.00-wide bear call spread was established for a net credit of $3.85 (x 7K contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that XLC will close below the break-even price of $68.85 at expiration.

Arlo Technologies Inc. (ARLO + $0.11 to $9.72): Option volume is running at ~3x the daily average on this cloud-based platform provider which is primarily being driven by activity on the June 16th 10.00 call. Volume on this contract is 1,931 versus open interest of 1,119, which suggests that we have some new positioning here. The bulk of the activity on this contract consisted of various-sized blocks that were being bought at various times at the ask price of $0.30 each, which suggests bullish intent.

Gauging Volatility

The Cboe Volatility Index (VIX – 0.86 to 14.79) is dropping to a 52-week low today (the intraday range is 14.65-15.65) as equity markets are firmly higher across the board around the mid-day mark (DJI + 630, SPX + 58, COMPX + 133). VIX option volume has been above average today at 1,227,343 contracts, which puts the index at the #5 spot on the “Top Volume by Underlying” list. The volume put/call ratio is currently 0.27 with the highest volume contract being the August 16th 20.00 call (volume is 158,945 vs. open interest of 15,874).

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.