Today's Options Market Update

Returning from its worst week in two months, Wall Street struggled to find buying interest Monday and saw volatility leap to post-election highs ahead of closely watched earnings from Nvidia (NVDA) two days away.

The S&P 500® index (SPX) slipped late last week to levels last seen before the election following hot inflation and retail sales data and caution signs from the Federal Reserve that sapped hopes of another rate trim. Odds of a December rate cut plunged below 60% late last week from recent peaks near 80%. Stocks tacked on gains overnight but then wavered ahead of the opening bell.

While the broader market lost only 2% last week, the tech-heavy Nasdaq Composite® ($COMP) suffered more dramatic 3% losses. Semiconductor weakness played a role, especially Friday when chip supplier Applied Materials (AMAT) tumbled more than 9% on a disappointing outlook to round out 3.5% losses for the PHLX Semiconductor Index (SOX) that day alone. With Nvidia ahead Wednesday afternoon, the volatile chips sector stays in focus and could play kingmaker once again.

Concerns built ahead of Nvidia's results after reports of server overheating problems related to the company's new Blackwell AI product. Shares fell in pre-market action, even as shares of the other mega cap stocks, including Tesla (TSLA), gained and helped support overnight positivity across major indexes.

Still, the fresh rise in volatility that accompanied this morning's light stock market uptick could suggest a certain wariness. When stocks and volatility climb together, it can lead to one or the other turning tail. Additionally, the Treasury market showed no signs of turning its own tail following last week's gains. The benchmark 10-year note yield rose again today and flirted with 4.5%, a possible brake on any rally.

The 10-year Treasury note yield ($TNX) is up ~3 basis points to 4.455%.

The U.S. Dollar Index ($DXY) is lower by 0.19 to 106.50.

WTI Crude Oil (/CL) is trading higher by 2.63% to $68.78 per barrel.

Gold prices have traded in a range of $2,568.50 to $2,616.70 and were last seen trading higher by 1.79% to $2,616.10/oz.

Natural Gas prices have traded in a range of $2.832-2.974 so far today and were last seen trading higher by 2.66% at $2.898/MMBtu.

Bitcoin (/BTC) is trading higher by 2.49% to $92,044.83 today.

Source: Schwab Center for Financial Research

Shares of Tesla Inc. (TSLA + $19.95 to $340.67) are being driven higher this morning by a Bloomberg News report that President-elect Donald Trump’s transition team is planning to set up federal regulations for autonomous vehicles. Last month Tesla CEO Elon Musk called the state-by-state approval process for self-driving vehicles “incredibly painful”. A more favorable regulatory environment for autonomous vehicles could help speed up the production timeline for Tesla’s Robotaxi. Calls are outnumbering puts ~5:2 with the November 22^nd 360.00 call being the highest volume contract (volume is 68,556).

Also trading to the upside this morning is Moderna Inc. (MRNA + $1.63 to $38.48) after HSBC upgraded the vaccine maker to “Buy” from “Hold” while trimming their price target on the stock to $58.00 from $82.00. Analysts at HSBC cited opportunities within Moderna’s pipeline, including the potential success of the company’s cytomegalovirus CMV vaccine which is currently in Phase 3 development. Shares of MRNA closed at four-year lows on Friday. Calls are outnumbering puts ~2:1 with the January 2025 45.00 call leading the way (volume is 3,136).

New 52-week highs (76 new highs today): Affirm Holdings Inc. (AFRM + $5.42 to $61.57), Live Nation Entertainment Inc. (LYV + $3.27 to $132.27), Targa Resources Inc. (TRGP + $1.75 to $197.97)

Some unusual call activity (~14:1 calls over puts) is being seen in Uranium Energy Corp. (UEC + $0.92 to $8.33) as option traders primarily target the November 29^th 8.00 call. Volume on this contract is 10,681 versus open interest of 1,228, so we know that the activity primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought around the same time at the ask price of $0.40 each, which suggests bullish intent. Shares of uranium stocks are trading higher today on a report that Russia will curtail uranium exports to the U.S.

Moving lower this morning is Nvidia Corp. (NVDA - $2.54 to $139.44) following a report that the company’s Blackwell AI chips are experiencing overhearing issues when connected in server racks designed to hold up to 72 chips. The report comes ahead of Nvidia’s Q3 earnings report which is scheduled to be released on Wednesday after the bell. Calls are outnumbering puts ~4:3 with the November 22^nd 150.00 call topping the most actives list (volume is 43,656).

Also trading to the downside this morning is Biogen Inc. (BIIB - $1.53 to $158.46) after Needham downgraded the biotech firm to “Hold” from “Buy” while leaving their $270.00 price target unchanged. Analysts at Needham cited a slow ramp in sales of the company’s Alzheimer’s drug (Leqembi) and see “no meaningful source of upside” for the stock over the next year. Shares of BIIB are trading at the lowest levels since 2013 this morning. Calls are outnumbering puts ~10:1 which is primarily being driven by activity on the December 18^th 185.00 call (volume is 1,321).

New 52-week lows (169 new lows today): ASML Holdings N.V. (ASML + $3.98 to $662.61), PepsiCo Inc. (PEP + $0.66 to $159.28), Walgreens Boots Alliance Inc. (WBA + $0.16 to $8.64)

Some unusual put activity is being seen in Forward Air Corp. (FWRD - $0.32 to $34.20) which is primarily being driven by a 1,010 contract block that was bought on the January 2025 35.00 put at the ask price of $3.50 (open interest is 55). 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.

Skechers U.S.A. Inc. (SKX + $0.54 to $61.24): Option volume is running at ~30x the daily average on this footwear retailer which is primarily being driven by a couple of large blocks that simultaneously traded on the December 20^th expiration earlier this morning:

• 60.00 put (open interest is 287): A 5,580 contract block was bought for $1.68 when the bid/ask spread was $1.60 x $1.70.
• 52.50 put (open interest is 30): A 5,580 contract block was sold for $0.18 when the bid/ask spread was $0.15 x $0.25.

We know that both of these blocks are new positions based on the respective open interest figures and it appears that a $7.50-wide bear put spread was established for a net debit of $1.50 (x 5,580 contract x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that SKX will close below the break-even price of $58.50 at expiration.

Amentum Holdings Inc. (AMTM - $1.89 to $23.32): Option volume is running at ~18x the daily average on this provider of engineering and technology services and solutions which is primarily being driven by a couple of large blocks that simultaneously traded on the December 20^th expiration earlier this morning:

• 25.00 call (open interest is 877): A 1,000 contract block was bought for $1.75 when the bid/ask spread was $1.35 x $1.95.
• 30.00 call (open interest is 783): A 1,000 contract block was sold for $0.55 when the bid/ask spread was $0.45 x $0.80.

We know that both of 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 $1.20 (x 1,000 contract x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that AMTM will close above the break-even price of $26.20 at expiration.

Teva Pharmaceuticals Industries Ltd. (TEVA - $0.09 to $16.34): Option volume is running at over 10x the daily average on this drug manufacturer which is primarily being driven by a couple of large blocks that simultaneously traded on two different expirations earlier this morning:

• November 22^nd 2024 16.00 put (open interest is 31): A 10,000 contract block was sold at the bid price of $0.13.
• December 27^th 2024 16.00 put (open interest is 1): A 10,000 contract block traded for $0.66 when the bid/ask spread was $0.45 x $1.11.

We know that both of these blocks are new positions based on the respective open interest figures, and it appears that a long put calendar spread was established for a net debit of $0.53 (x 10K contract x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that TEVA will remain above the $16.00 price level by this Friday but close below the break-even price of $15.47 at the December 27^th expiration.

The Cboe Volatility Index (VIX - 0.49 to 15.65) has been on both sides of the unchanged line today (the intraday range is 15.47-17.00) as equity markets are mixed around the mid-day mark (DJI - 5, SPX + 26, COMPX + 128). VIX option volume has been above average today at 396,356 contracts, which puts the index at the #9 spot on the “Top Volume by Underlying” list. The volume put/call ratio is currently 0.46, but the highest volume contract is the November 20^th 15.00 put (volume is 33,616 vs. open interest of 389,910).