Today's Options Market Update

With one day to go until key employment data, major indexes pulled back this morning amid weakness in Treasuries and cryptocurrencies. Defense industry stocks including Lockheed Martin (LMT) and Northrop Grumman (NOC) bucked the lower trend, posting 8% gains before the open after President Trump called for a 50% increase in the defense budget. That proposal might face challenges in a Congress concerned about rising deficits and also may help explain today's climbing Treasury yields.

Consensus for tomorrow morning's December nonfarm payrolls growth is 55,000, Briefing.com said, with unemployment expected to ease to 4.5% and wages edging up 0.3%. But the so-called "whisper number" is lower at around 45,000, and the three-month average is an anemic 22,000. Federal Reserve Chairman Jerome Powell thinks these reports over-estimate jobs growth by thousands a month, so downward revisions might occur later. And yesterday's ADP private sector jobs report was light. So were job openings.

Major indexes dropped yesterday except for the tech-heavy Nasdaq, and volatility keeps creeping up. The weak labor reports hurt Wall Street Wednesday, though loss of momentum in energy, memory chip makers, and defense firms probably hurt, too. Along with data, tomorrow could feature a tariff ruling from the Supreme Court. In data today, initial jobless claims fell to 208,000 while continuing claims rose. A report on labor costs showed easing pressure while layoffs in December fell to around 35,000, lower than expected, and productivity surged. Still, total 2025 job cuts rose 58% from 2024, according to Challenger, Gray and Christmas.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is higher by nearly 3 basis points to 4.177%.

The U.S. Dollar Index ($DXY) is higher by 0.152 to 98.836.

WTI Crude Oil (/CL) is higher by 1.48% to $56.82/barrel.

Gold prices have traded in a range of $4,415.00-$4,475.20 and were last seen trading lower by ~0.03% to $4,461.00/oz.

Natural Gas prices have traded in a range of $3.377-3.634 today and were last seen trading lower by 3.55% to $3.40.

Bitcoin (BTC) is lower by ~0.55% to $90,780.16 today.

Shares of Costco Wholesale Corp. (COST + $46.05 to $928.63) are gapping up this morning after the warehouse retailer reported strong sales for the five weeks ended January 4th earlier this morning. Costco said that net sales increased 8.5% from the year-ago comparable period to $29.86B, as total comparable same-store sales rose 7% (+6% in U.S., +8.4% in Canada, +11% international). Shares of COST are trading above the 100-day Simple Moving Average (SMA) for the first time since August today. Calls are outpacing puts ~2:1 with the January 9^th 900.00 call being the highest volume contract (volume is 2,722).

Also trading to the upside this morning is Constellation Brands Inc. (STZ + $9.26 to $149.75) after the beer, wine and spirits maker reported Q3 earnings of $2.88 per share ($0.24 beat) on net sales that decline 10% year-over-year (YoY) to $2.22B (above the $2.16B expected). Looking ahead, the company said that FY26 Non-GAAP EPS is expected to come in a range of $11.30-11.60 (vs. the $11.48 FactSet consensus estimate) with FY26 organic net sales expected to decline 4-6% YoY. Calls are outnumbering puts ~3:2 with the January 9^th 160.00 call leading the way (volume is 2,494).

New 52-week highs (139 new highs today): Casey’s General Store Inc. (CASY + $16.48 to $590.09), FedEx Corp. (FDX + $6.47 to $313.80), Merck & Co. (MRK + $3.33 to $111.93)

Some unusual call activity (~6:1 calls over puts) is being seen in Southwest Airlines Co. (LUV + $0.35 to $43.00) which is primarily driven by an 21,000 contract block that was bought on the February 20^th 47.50 call for $0.72 when the bid/ask spread was $0.69 x $0.73 (open interest is 1,269). 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.

Shares of Acuity Inc. (AYI - $54.73 to $315.07) are under pressure this morning after the provider of lighting, lighting controls and building management systems reported Q1 adjusted earnings of $4.69 per share ($0.10 beat) on net sales that increased 20% YoY to $1.14B (in-line with analyst expectations). The sales growth was primarily driven by a $183.9M increase (to $257.4M YoY) in the company’s intelligent spaces segment. Calls are outnumbering puts nearly 2:1 with the January 16^th 340.00 call being the highest volume contract (volume is 41).

Also trading to the downside today is Alcoa Corp. (AA - $2.63 to $60.11) after JPMorgan downgraded the aluminum producer to “Underweight” from “Neutral” while bumping their price target on the stock to $50.00 from $45.00. Analysts at JPMorgan view the current risk-reward profile as “skewed negatively” given the recent rally in the stock and see aluminum pricing “leveling out”. Puts are outnumbering calls ~3:2 with the January 23^rd 50.00 put being the highest volume contract (volume is 504).

New 52-week lows (46 new lows today): American Tower Corp. (AMT + $0.90 to $170.34), GoDaddy Inc. (GDDY - $2.61 to $114.87), Lamb Weston Holdings Inc. (LW + $0.23 to $40.52)

Some unusual put activity is being seen in CommScope Holding Company (COMM + $0.04 to $17.74) which is primarily driven by an 8,000 contract block that was bought on the February 20^th 15.00 put for $0.38 when the bid/ask spread was $0.10 x $0.55 (open interest is 1,455). 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 above the midpoint of the bid/ask spread.

Planet Fitness Inc. (PLNT + $1.03 to $105.43): Option volume is running at ~117x the daily average on this fitness center operator which is primarily being driven by a couple of large blocks that simultaneously traded on the January 16^th expiration earlier this morning:

• 110.00 call (open interest is 1,731): A 20,000 contract block was bought at the ask price of $1.25.
• 115.00 call (open interest is 3,902): A 20,000 contract block was sold for $0.45 when the bid/ask spread was $0.40 x $0.55.

We know that 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 $0.80 (x 20K contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that PLNT will close above the break-even price of $110.80 at expiration.

GDS Holdings Ltd. (GDS + $2.99 to $41.43): Option volume is running at ~18x the daily average on this China-based data center operator as option traders primarily target the June 18^th 47.00 call. Volume on this contract is 4,356 versus open interest of 1,408, so we know that the volume primarily represents new positioning. The majority of the transactions consisted of various-sized blocks that were bought at various times for between $4.60-$5.00 each, which suggests bullish intent.

Draganfly Inc. (DPRO + $0.68 to $8.98): Option volume is running at ~8x the daily average on this drone maker which is primarily driven by a 3,000 contract block that was bought on the April 17^th 17.50 call for $0.85 when the bid/ask spread was $0.35 x $1.00 (open interest is 84). 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 - 0.17 to 15.21) has been on both sides of the unchanged line today (the intraday range is 15.20-15.85), as equity markets are mixed around the midday mark (DJI + 307, SPX + 1, $COMP - 138). VIX option volume is above average today at 497,537 contracts, and calls are outpacing puts ~3:2 so far today.