Today's Options Market Update

U.S. jobs growth totaled 64,000 in November and unemployment rose to 4.6%—the highest since 2021 and up from 4.2% a year ago, the government said Tuesday in its nonfarm payrolls report. Though the headline data from November didn't clash dramatically with expectations, October's massive plunge of 105,000 jobs showed a labor market that continues to struggle. Major U.S. indexes, which approached the report lower in trading before the bell, were little changed after the data and remained red, with the tech-heavy Nasdaq still down most. The dollar and Treasury yields slipped after the news.

Consensus heading into the report was for November jobs creation of 30,000 with unemployment little changed at 4.5%, so the data for that month could be read as mixed versus expectations. However, jobs growth from August and September got revised downward by a combined 33,000 before October's big drop, though the government didn't collect October unemployment data due to the shutdown that also delayed November's data. "The report shows there's ongoing weakness in the labor market," said Cooper Howard, director of fixed income research and strategy at the Schwab Center for Financial Research. "The labor market is softening but not falling off a cliff."

On Monday, stocks opened hot but quickly cooled as info tech selling carried over from last week. Big hitters like Broadcom (AVGO), Alphabet (GOOGL), Microsoft (MSFT), and Apple (AAPL) weighed down major indexes, though market breadth improved. The S&P 500 index appears to be consolidating without much conviction either way. On a positive note, it remains just 1% to 2% off all-time highs despite almost no help from tech. However, it may need tech's revival to test the all-time high of 6,920. Potential catalysts include today's jobs data, Thursday's inflation reading, and earnings from Nike (NKE), FedEx (FDX), and Micron (MU) in coming days. The path of least resistance seems higher, but an end-of-year rally isn't certain.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is lower by ~1 basis point to 4.172%.

The U.S. Dollar Index ($DXY) is lower by 0.155 to 98.154.

WTI Crude Oil (/CL) is lower by 2.85% to $55.20/barrel.

Gold prices have traded in a range of $4,297.40-$4,367.90 and were last seen trading higher by ~0.46% to $4,355.20/oz.

Natural Gas prices have traded in a range of $3.845-4.045 today and were last seen trading lower by 3.41% to $3.874.

Bitcoin (BTC) is higher by ~1.67% to $87,864.10 today.

Shares of UBS Group AG (UBS + $1.75 to $44.44) are trading at 17-year highs this morning after Bank of America Securities (BofA) upgraded the Swiss bank to “Buy” from “Neutral” and hiked their price target on the stock to a “Street high” $60.30 from $44.00. Analysts at BofA cited Swiss proposals for more lenient capital requirements and believe the bank could deliver roughly 30% EPS growth between 2025 and 2028, the highest sequential pace of any bank that they cover. Calls are outnumbering puts ~3:1 with the January 16^th 45.00 call seeing the most action from traders (volume is 969).

Also trading to the upside this morning is Okta Inc. (OKTA + $1.21 to $89.41) after Jefferies upgraded the identity access management company to “Buy” from “Hold” and raised their price target on the stock to $125.00 from $90.00, citing a compelling valuation and the potential for identity security growth in 2026. Calls are outnumbering puts ~2:1 with the December 19^th 92.50 call being the highest volume contract (volume is 559).

New 52-week highs (86 new highs today): Delta Air Lines Inc. (DAL + $0.67 to $71.94), General Motors Co. (GM - $0.09 to $81.89), Ross Stores Inc. (ROST - $1.11 to $183.17)

Some unusual call activity (~70:1 calls over puts) is being seen in PENN Entertainment Inc. (PENN + $0.26 to $14.07) as option traders primarily target the December 19^th 15.00 call. Volume on this contract is 8,769 versus open interest of 1,887, so we know that the activity primarily represents fresh positioning. The majority of the transactions consisted of various-sized blocks that were bought at various times for between $0.08-0.12 each, which suggests bullish intent.

Shares of Automatic Data Processing Inc. (ADP - $4.11 to $260.84) are moving lower this morning after Jefferies downgraded the provider of cloud-based human capital management (HCM) solutions to “Underperform” from “Hold” and cut their price target on the stock to a $230.00 from $245.00. Jefferies analyst Samad Samana said the company’s “fundamental outlook appears shaky”, due to potential market saturation, lower interest rates and a higher number of scaled rivals heading into next year. Calls and puts are trading roughly even with the January 16^th 280.00 call seeing the most action from traders (volume is 27).

Also trading to the downside this morning is Archer-Daniels-Midland Company (ADM - $1.67 to $58.53) after Morgan Stanley downgraded the agricultural processing and nutrition company to “Underweight” from “Equal Weight” and cut their price target on the stock to a $50.00 from $57.00, citing persistent in the company’s Crushing unit, ample global supplies, trade uncertainties and delays in Renewable Volume Obligation decisions. Calls and puts are trading roughly even with the December 19^th 57.50 call being the highest volume contract (volume is 52).

New 52-week lows (125 new lows today): Costco Wholesale Inc. (COST - $5.59 to $854.97), Motorola Solutions Inc. (MSI - $4.73 to $360.11), Tenable Holdings Inc. (TENB - $0.26 to $24.49)

Some unusual put activity (~100:1 puts over calls) is being seen in ABM Industries Inc. (ABM - $0.57 to $46.61) which is primarily being driven by a couple of large blocks that simultaneously traded on the December 19^th expiration earlier this morning:

• 45.00 put (open interest is 53): A 3,000 contract block was bought for $1.19 when the bid/ask spread was $0.70 x $1.40.
• 40.00 put (open interest is 19): A 3,000 contract block traded for $0.10 when the bid/ask spread was $0.05 x $0.15.

We know that these blocks are new positions based on the respective open interest figures, and it appears (since the block on the 45.00 put was bought) that a $5.00-wide bear put spread was established for a net debit of $1.09 (x 3K contract x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that ABM will close below the break-even price of $43.91 at expiration. This appears to be a bearish “earnings play” since ABM is scheduled to report Q4 earnings before the bell tomorrow.

Navan Inc. (NAVN - $2.66 to $11.98): Option volume is running at ~22x the daily average on this AI-powered software platform operator which is primarily driven by a 6,000 contract block that was bought on the January 16^th 15.00 call at the ask price of $0.35 (open interest is 144). 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.

Copart Inc. (CPRT + $0.35 to $39.02): Option volume is running at ~17x the daily average on this provider of online auctions and vehicle remarketing services as option traders primarily target the January 16^th 40.00 call. Volume on this contract is 11,262 versus open interest of 1,087, so we know that the activity primarily represents fresh positioning. The majority of the transactions consisted of various-sized blocks that were bought at various times for between $0.75-0.85 each, which suggests bullish intent.

PPG Industries Inc. (PPG + $0.56 to $104.29): Option volume is running at ~9x the daily average on this paints, coatings, and specialty materials maker which is primarily driven by a 1,500 contract block that was bought on the January 16^th 115.00 call for $0.45 when the bid/ask spread was $0.10 x $0.75 (open interest is 400). 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 above the midpoint of the bid/ask spread.

The Cboe Volatility Index (VIX + 0.11 to 16.61) has been on both sides of the unchanged line today (the intraday range is 16.31-17.51), as equity markets are modestly lower around the midday mark (DJI - 217, SPX - 22, $COMP - 10). VIX option volume is above average today at 731,743 contracts, and the activity has been call-biased so far today.