Today's Options Market Update

Two of the three mega caps that reported late Wednesday impressed investors, enough to give Wall Street a light lift early today. Meta Platforms (META) rolled up 9% gains while Tesla (TSLA) added 2%. Microsoft (MSFT) was the black sheep with losses of almost 7% after cloud growth slowed and spending rose. Apple (AAPL) reports later. Beyond earnings, the dollar continued weakening this morning while metals kept rallying amid geopolitical uncertainty and the growing likelihood of another U.S. government shutdown.

As expected, the Federal Reserve paused rates Wednesday after three consecutive cuts. "The decision to hold steady reflects a lack of reason to cut," said Kathy Jones, chief fixed income strategist at the Schwab Center for Financial Research, or SCFR. "The Fed likely reasons that economic growth is strong at around 3.5% to 4%, there's fiscal stimulus ahead, inflation is closer to 3% than the 2% target, the dollar is softening, financial conditions are very loose, and unemployment is low." Market participants still expect two rate cuts this year, but chances don't rise above 50% for a cut until mid-year, according to the CME FedWatch Tool.

Stocks, which rose out of the gate Wednesday to lift the S&P 500 Index briefly above 7,000 for the first time, finished flat. One source of pressure late in the day might have been rising Treasury yields that reflected a more upbeat Fed statement about the economy. In his press conference, Fed Chairman Jerome Powell said he expects to make decisions meeting by meeting and cited broad support among policymakers for a pause. Upside risks to inflation and downside risks to employment have both "diminished a bit," Powell added, noting he doesn't believe the Fed's current policy is significantly restrictive with a fed funds target range of 3.5% to 3.75%.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is lower by ~1 basis point to 4.239%.

The U.S. Dollar Index ($DXY) is higher by 0.04 to 96.48.

WTI Crude Oil (/CL) is higher by 3.35% to $65.33/barrel.

Gold prices have traded in a range of $5,126.00-5,626.80 and were last seen trading lower by ~1.88% to $5,239.80/oz.

Natural Gas prices for March futures have traded in a range of $3.728-3.925 today and were last seen trading higher by 0.72% to $3.759.

Bitcoin (BTC) is lower by ~4.78% to $84,825.91 today.

Shares of Meta Platforms Inc. (META + $55.37 to $724.10) are gapping up to a three-month high this morning after the social media giant reported Q4 EPS of $8.88 ($0.67 beat) on Q4 revenue that increased 24% year-over-year (YoY) to $59.89B (above the $58.46B FactSet consensus estimate). META also provided upbeat guidance as Q1 revenue is expected to come in a range of $53.5-56.5B versus the $51.37B consensus estimate. Regarding spending guidance, META said that capital expenditures for 2026 are expected to come in a range of $115-135B, which was well above the $110.7B analysts were projecting. Calls are outnumbering puts nearly 2:1 with the January 30^th 750.00 call seeing the most action from traders (volume is 33,985).

Also trading to the upside this morning is IBM Corp. (IBM + $18.28 to $312.44) after the IT services provider reported Q4 adjusted EPS of $4.52 ($0.20 beat) on Q4 revenue that increased 12.15% YoY to $19.686B (above the $19.226B expected). IBM’s Q4 infrastructure revenue came in at 5.13B, which was above the $4.71V consensus estimate. Looking ahead, the company said that full-year 2026 revenue is expected to be more than $70.91B, which is above the $70.14B consensus estimate. Calls are outnumbering puts ~3:2 with the January 30^th 320.00 call leading the way (volume is 3,666).

New 52-week highs (236 new highs today): Cardinal Health Inc. (CAH + $0.89 to $211.28), Chevron Corp. (CVX + $2.15 to $172.08), FedEx Corp. (FDX + $1.87 to $316.52)

Some unusual call activity (~100:1 calls over puts) is being seen in VAALCO Energy Inc. (EGY + $0.25 to $5.14) as option traders primarily target the February 20th 6.00 call. Volume on this contract is 25,683 versus open interest of 57, 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 $0.10-0.15 each, which suggests bullish intent.

Shares of Microsoft Corp. (MSFT - $54.60 to $427.13) are under pressure this morning even though the tech giant beat quarterly estimates last night after the bell. Investors appear to be focusing on the company’s slightly lower Azure growth and lackluster guidance. For the fiscal second quarter, MSFT reported adjusted EPS of $4.14 ($0.23 beat) on Q2 revenue that increased 17% YoY to $81.27B (above the $80.31B FactSet consensus estimate). Microsoft’s Azure cloud computing revenue increased 39% YoY (slightly below the +39.4% expected) for the quarter. The company’s remaining performance obligations (RPO) increased 110% YoY to $625B. Looking ahead, Microsoft guided Q3 revenue to $81.2B at the midpoint (slightly below the $81.23B consensus estimate) and Q3 Azure growth to be 37-38% in constant currency (vs. the +37% analysts had expected). Calls are outnumbering puts ~3:2 with the January 30^th 445.00 call being the highest volume contract (volume is 27,725).

Also trading to the downside today is ServiceNow Inc. (NOW - $15.02 to $114.60) even though the cloud-based software company posted better-than-expected quarterly results. ServiceNow reported Q4 adjusted EPS of $0.92 ($0.04 beat) on Q4 revenue that increased 20.5% YoY to $3.568B (above the $3.527B expected). Additionally, the company’s Board of Directors authorized an additional $5B for the existing share repurchase program. Looking ahead, the company said that full-year 2026 subscription revenue is expected to come in a range of $15.53-15.57B, which implies ~20-21% growth YoY versus analysts expectations of 18.0-18.5%. Calls are outnumbering puts nearly 2:1 with the February 20^th 125.00 call seeing the most action from traders (volume is 4,106).

New 52-week lows (183 new lows today): Adobe Systems Inc. (ADBE - $12.26 to $287.32), Checkpoint Software Inc. (CHKP - $5.24 to $175.00), Salesforce Inc. (CRM - $15.94 to $212.02)

Some unusual put activity (~10:1 puts over calls) is being seen in LegalZoom Inc. (LZ - $0.15 to $9.16) as option traders primarily target the February 20^th 9.00 put. Volume on this contract is 5,347 versus open interest of 518, so we know that the volume primarily represents new positioning. The bulk of the transactions consisted of various-sized blocks that were bought around the same time at the ask price of $0.60 each, which suggests bearish intent.

Brookdale Senior Living Inc. (BKD + $0.98 to $14.10): Option volume is running at ~98x the daily average on this operator of senior living communities which is primarily being driven by a couple of large blocks that simultaneously traded on the February 20^th expiration earlier this morning:

• 15.00 call (open interest is 4): A 3,200 contract block was bought at the ask price of $0.75.
• 17.00 call (open interest is 0): A 3,200 contract block was sold for $0.28 when the bid/ask spread was $0.00 x $0.75.

We know that these blocks are new positions based on the respective open interest figures, and it appears that a $2.00-wide bull call spread was established for a net debit of $0.47 (x 3,200 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that BKD will close above the break-even price of $15.47 at expiration. BKD is scheduled to report fiscal Q4 earnings on February 17th after the bell, so this positioning captures the potential impact of that event.

Element Solutions Inc. (ESI - $0.19 to $29.70): Option volume is running at ~55x the daily average on this specialty chemicals company which is primarily driven by a 2,000 contract block that was bought on the February 20^th 30.00 put for $1.20 when the bid/ask spread was $0.35 x $1.50 (open interest is 2). 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.

Alkami Technology Inc. (ALKT - $0.77 to $21.64): Option volume is running at ~23x the daily average on this provider of cloud-based digital banking solutions which is primarily being driven by a couple of large blocks that simultaneously traded on the March 20^th expiration earlier this morning:

• 25.00 call (open interest is 1,563): A 2,100 contract block was bought at the ask price of $1.15.
• 30.00 call (open interest is 32): A 2,100 contract block was sold for $0.45 when the bid/ask spread was $0.00 x $2.10.

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 $0.70 (x 2,100 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that ALKT will close above the break-even price of $25.70 at expiration. ALKT is scheduled to report fiscal Q4 earnings on February 26th after the bell, so this positioning captures the potential impact of that event.

The Cboe Volatility Index (VIX + 0.70 to 17.05) is up by 4.30%, as equity markets are mixed in morning trading (DJI + 43, SPX - 5, COMPX - 9). VIX movement has occurred within a narrow range today (the intraday range is 16.05 to 17.18). The highest volume contract is currently the April 15th, 2026, 47.50 call (volume is 45,021 vs. open interest of 123,622).