Today's Options Market Update

Stock index futures kicked off the week with fresh gains to build on Friday's recovery rally, but more volatility may be ahead as participants eye a host of Fed speakers and key inflation data ahead. Banking sector health remains front and center as the quarter winds down.

This morning's boost got more traction after Bloomberg reported that U.S. authorities were considering expanding an emergency lending program for banks, which could give First Republic Bank (FRC) more time to shore up its liquidity. However, stock futures were already higher overnight before that news.

Further support followed news that First Citizens BancShares agreed to buy large parts of Silicon Valley Bank, where the banking industry turmoil first surfaced several weeks ago. Regional bank stocks are rising on these industry news items early Monday, and on reports that outflows from regional banks to large banks weren't as large as feared over the weekend.

As of this morning, there's about a 35% probability of a 25-basis-point rate hike at the Federal Reserve's May meeting, according to the CME FedWatch Tool. That's compared with a 70% chance a month ago, a huge reversal that reflects how banking instability can disrupt the Fed's plans.

The 10-year Treasury note yield ($TNX) rose 8 basis points to 3.46%. The U.S. Dollar Index ($DXY) is up slightly at 103.3. The Cboe Volatility Index^® ($VIX) futures fell slightly to 21.42. WTI Crude Oil (/CL) rose to $70.20 per barrel. Natural Gas prices were last seen trading - $0.118 (or - 5.00%) to $2.243/MMBtu.

Source: Schwab Market Update

One of today's biggest gainers is First Citizens BancShares (FCNCA + $265.33 to $846.50) following news that the regional bank would acquire the deposits ($119B) and loans ($72B) of failed lender Silicon Valley Bank for $500M in stock. FCNCA says the combined bank will be resilient through a diverse loan portfolio and deposit base, and that it will have access to a credit line from the FDIC for contingent liquidity reasons, as well as the ability to share losses with the FDIC on commercial loans. Calls are outnumbering puts ~3:2 with the April 21^st 750.00 call getting the most attention from traders (volume is 302).

Also moving higher are shares of Novartis (NVS + $6.06 to $89.65) after the Swiss pharmaceutical company announced positive topline results from an interim analysis of NATALEE, a Phase 3 trial evaluating Kisqali plus endocrine therapy in a broad population of patents with a certain form of early metastatic breast cancer at risk of recurrence. NVS described the results as a major milestone and potentially paradigm-shifting. Calls and puts are trading about even with the May 21^st 90.00 call getting the most attention from traders (volume is 329).

New 52-week highs (72 new highs today): TravelCenters America (TA + $0.63 to $86.86), Pinterest (PIN + $0.59 to $28.06), Vita Coco (COCO + $0.93 to $20.22), ELF Beauty (ELF + $0.90 to $79.38)

Some unusual call activity (~3:2 over puts) came up on the screening tools today on toymaker Hasbro (HAS + $0.32 to $49.36) which is primarily being driven by a block trade for 3,000 contracts on the April 21^st 52.50 call (open interest is 1,132). This trade was executed at a price of $1.20 when the bid/ask spread was $0.95/$1.35. Given the open interest level, we know that this was a new position, and since it was purchased above the midpoint of the bid/ask spread, long calls generally imply bullish sentiment.   

Some unusual call activity (~3:1 over puts) is being seen in big technology company IBM (IBM + $3.58 to $128.90) which is primarily being driven by activity on the March 31^st 130.00 call. Volume on this contract is 24,455 (versus open interest of 2,605) so we know that most of this is new positioning. The majority of the trades were small to medium in size and were executed at or close to various ask prices ranging from $0.32 to $0.65, which implies bullish sentiment.

One of today's biggest decliners again is Coinbase Global (COIN - $4.47 to $63.35) after a Bloomberg news report said the pending SEC enforcement against the company potentially threatens the entire digital assets sector. The article said that many in the crypto industry see the action against COIN as an attempt to regulate the industry out of business. The Crypto Council for Innovation described the SEC as openly hostile and the Chamber of Digital Commerce said the SEC is using fear tactics to effectuate a political power grab. You may recall that COIN was one of the biggest decliners last Thursday (3/23) after receiving a Wells notice from the SEC that it had violated investor protection laws, and that its staking products require SEC registration. Puts are outnumbering calls ~3:2 with the March 31^st 60.00 put seeing the most action from traders (volume is 8,990).

Potentially as a result of the same story, also moving lower today are shares of enterprise software maker MicroStrategy (MSTR - $12.17 to $244.50). MSTR often moves in tandem with Bitcoin (BTC - 3.72% to $26,800), as MSTR and its CEO Michael Saylor reportedly own more than $3.8B in Bitcoin. Separately MSTR also announced today that it had paid off the remainder of a $205M Bitcoin-backed loan from Silvergate Bank, about 2-years early. Puts are outnumbering calls ~2:1 with the April 6^th 165.00 put seeing the most action from traders (volume is 1,104).

New 52-week lows (73 new lows today): Groupon (GRPN + $0.01 to $3.68), Lemonade (LMND - $0.52 to $12.42), Plug Power (PLUG - $0.57 to $10.66), Taro Pharma (TARO - $0.37 to $23.98)

Some unusual put activity (~3:1 over calls) is being seen in mobile technology company Digital Turbine (APPS + $0.18 to $11.46) which is primarily being driven by activity on the following contracts for the March 31^st expiration.

• 11.00 puts (open interest is 5,424): 5,487 contracts traded; most of which appear to have been sold at or near bid prices ranging from $0.11 to $0.13
• 13.00 puts (open interest is 2,119): 2,115 contracts traded; most of which appear to have been bought at or near ask prices ranging from $1.38 to $1.41

Given that these trades were not executed simultaneously and the respective open interest levels, we don't know for sure if these are new positions. It is possible that this trader(s) could be closing low strike puts and replacing them with higher strike puts, or legging into new bearish spread positions.  

Some unusual put activity (>1000:1 over calls) is being seen in technology company Unisys (UIS + $0.10 to $3.55) which is entirely being driven by a single block trade for 7,500 contracts on the January 19^th 2024 3.00 put (open interest is 15,258). This block executed in two parts: 1,480 were sold at $0.55 and 5,915 were sold at $0.50, both when the bid/ask spread was $0.45/$0.75. Given the open interest, we can't be certain that this was a new position, but since there is still 299 days until expiration, it seems likely, and a put sale usually implies bullish sentiment.

Purecycle Technologies (PCT - $0.06 to $6.31): Option volume is running at over 4x the daily average on this recycling company which is primarily being driven by a large block spread as follows:

• 8/18/2023 11.00 calls (open interest is 91): a 15,800 contract block was bought at $0.70 when the bid/ask spread was $0.50/$0.70
• 5/19/2023 11.00 calls (open interest is 91): a 15,800 contract block was sold at $0.20 when the bid/ask spread was $0.20/$0.30

Given the respective open interest levels, we know that these are new positions, and it appears that a calendar call spread was established here for a net debit of $0.50 (x 15,800 contracts x 100 multiplier, excluding commissions), which implies that this trader would like to see PCT stay below $11.00 until after the 5/19 expiration, and then go above $11.00 after that.

The Cboe Volatility Index (VIX - 0.50 to 21.27) has been on both sides of the unchanged line today (the intraday range is 20.99-22.93) as equity markets are mixed around the mid-day mark (DJI + 217, SPX + 8, COMPX - 62). VIX option volume has been below average today, as the index is currently missing from the “Top Volume by Underlying” list. The volume put/call ratio is 0.60 with the highest volume contract being the July 19^th 18.00 put (volume is 14,410 vs. open interest of 2,613).

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.