Today's Options Market Update

Stocks retreated early in today's session as investors grappled with a full plate of data and earnings, including lower-than-expected April retail sales and a sinking Producer Price Index (PPI). "Risk-off" appeared to be the mood early on, with commodity prices and tech stocks sliding while the market absorbed somewhat hawkish remarks from Federal Reserve Chairman Jerome Powell.

The standout number might be PPI, which fell 0.5% when analysts had expected a 0.3% increase. Core PPI, excluding food and energy, fell 0.4%, while annual headline PPI rose 2.4%. Retail sales rose just 0.1%, below the 0.2% consensus and well under March's 1.7% gain. The so-called control group retail sales number, which the government uses in its gross domestic product (GDP) calculation, fell 0.2%. "Retail sales shows there might be initial signs of cracks in the consumer," said Cooper Howard, director, fixed income strategy at the Schwab Center for Financial Research. "There was weakness across the board."

The data came after Walmart (WMT) exceeded earnings expectations partly due to pre-tariff stocking by consumers. Its CFO told CNBC that shoppers could face higher prices as soon as the end of this month. Besides Walmart, most of today's news looked cloudy from an economic standpoint, including two U.S. regional manufacturing surveys that were below levels signifying expansion. However, initial jobless claims remained benign at 229,000. "Overall, the data were positive for the bond market but not a trend changer," said Kathy Jones, chief fixed income strategist at Schwab. "It looks like there was some giveback after pre-tariff stockpiling on the part of consumers."

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is lower by ~6 basis points to 4.465%.

The U.S. Dollar Index ($DXY) is lower by 0.18 to 100.86.

WTI Crude Oil (/CL) is lower by 3.07% to $61.21/barrel.

Gold prices have traded in a range of $3,123.30-$3,216.50, last seen trading higher by 0.86% to $3,215.60/oz.

Natural Gas prices have traded in a range of $3.383-3.499 and were last seen trading lower by 2.81% to $3.402.

Bitcoin (BTC) is lower by ~1.17% over the past 24 hours to $102,345.80.

Gapping up to all-time highs this morning is Deere & Co. (DE + $20.15 to $517.65) after the farming equipment maker reported Q2 earnings of $6.64 per share ($1.08 beat) on Q2 revenue that fell 17.9% year-over-year to $11.17B (above the $10.95B FactSet consensus estimate). Regarding guidance, the company lowered its fiscal 2025 (FY25) net income guidance to a range of $4.75-5.50B from a prior view of $5.0-5.5B. Calls are slightly outnumbering puts with the May 16^th 540.00 call seeing the most action from traders (volume is 754).

Also trading to the upside this morning is Cisco Systems Inc. (CSCO + $4.18 to $65.47) after the networking equipment maker reported fiscal Q3 earnings of $0.96 per share ($0.04 beat) on revenue that rose 11.4% year-over-year to $14.15B (above the $14.05B expected) as Q2 non-GAAP operating margin came in at 34.5% (above 33-34% guidance). The company also issued upside guidance as Q4 EPS is expected to come in a range of $0.96-0.98 on Q4 revenue that is expected to come in a range of $14.50-14.70B, versus the respective $0.95 & $14.52B FactSet consensus estimates. Calls are outnumbering puts ~4:1 with the May 16^th 65.00 call being the highest volume contract (volume is 22,733).

New 52-week highs (63 new highs today): Charter Communications Inc. (CHTR + $8.38 to $422.24), GE Aerospace Inc. (GE + $4.45 to $227.69), TJX Companies Inc. (TJX + $1.37 to $132.62)

Some unusual call activity (~25:1 calls over puts) is being seen in Healthpeak Properties Inc. (DOC + $0.19 to $17.16) which is primarily being driven by activity on the October 17^th 20.00 call. Volume on this contract is 5,070 versus open interest of 488, so we know that the volume 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 $0.25 each, which suggests bullish intent.

Gapping down to four-year lows this morning is Dow-component United Health Group Inc. (UNH - $45.80 to $262.21) following a Wall Street Journal report that the U.S. Department of Justice was investigating the health insurer for potential Medicare fraud. In response to the report United Health said it has not been notified by the DOJ regarding any investigation and stands by "the integrity of our Medicare Advantage program". Calls are slightly outnumbering puts, but the May 16^th 250.00 put is the highest volume contract (volume is 44,590).

Also trading to the downside this morning is Alcoa Corp. (AA - $0.96 to $28.65) after UBS downgraded the aluminum, alumina and bauxite producer to "Neutral" from "Buy" and put a $31.00 price target on the stock. Analysts at UBS said the outlook for alumina looks weak and AA's valuation is no longer compelling. Calls are outnumbering puts ~5:1 with the May 23^rd 28.50 call leading the way (volume is 703).

New 52-week lows (88 new lows today): Biohaven Ltd. (BHVN - $3.39 to $16.27), Elevance Health Inc. (ELV + $0.73 to $375.02), Humana Inc. (HUM - $8.47 to $222.00)

Some unusual put activity (~5:1 puts over calls) is being seen in Equinor ASA (EQNR + $0.05 to $23.43) which is primarily being driven by activity on the June 20^th 21.00 put. Volume on this contract is 4,056 versus open interest of 569, so we know that the volume primarily represents new positioning. The majority of the volume is being attributed to a 3,200 contract block that was bought at the ask price of $0.25, which suggests bearish intent.

Cidara Therapeutics Inc. (CDTX + $1.31 to $20.62): Option volume is running at ~700x the daily average on this biotech firm which is primarily being driven by four large blocks that simultaneously traded on the July 18^th expiration earlier this morning:

• 40.00 call (open interest is 0): A 2,000 contract block was sold for $2.68 when the bid/ask spread was $1.00 x $5.50.
• 20.00 call (open interest is 0): A 2,000 contract block was bought for $7.22 when the bid/ask spread was $4.50 x $8.80.
• 17.50 put (open interest is 0): A 2,000 contract block was sold for $4.62 when the bid/ask spread was $3.00 x $7.40.
• 12.50 put (open interest is 0): A 2,000 contract block was bought for $3.58 when the bid/ask spread was $0.50 x $5.50.

We know that all these blocks are new positions based on the respective open interest figures and it appears that the block trader bought a $20.00-wide bull call spread for $4.54 and simultaneously sold a $5.00-wide put spread for a $1.04 credit. The combined 4-legged bullish strategy was established for a net debit of $3.50 (x 2,000 contract x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that CDTX will close above the break-even price of $23.50 at expiration. Earlier this morning CDTX said that it will host a virtual R&D day on May 22^nd to discuss one of the company's drugs (CD388) as a potential universal, once-per-flu season preventative treatment for seasonal and pandemic influenza, so this positioning captures the potential impact of this event.

NV5 Global Inc. (NVEE + $3.61 to $22.46): Option volume is running at ~114x the daily average on this provider of technology consulting services which is primarily being driven by activity on the May 16^th 20.00 call. Volume on this contract is 1,622 versus open interest of 164, so we know that the volume 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 $1.90 each, which suggests bullish intent.

Carter's Inc. (CRI + $0.38 to $36.09): Option volume is running at ~8x the daily average on this childrenswear retailer which is primarily being driven by activity on the June 20^th 42.50 call. Volume on this contract is 4,143 versus open interest of 378, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought around the same time for $0.25 each, which suggests bullish intent.

The Cboe Volatility Index (VIX – 0.39 to 18.23) has been on both sides of the unchanged line today (intraday range is 18.13-19.38), as equity markets are modestly higher around the midday mark (DJI + 143, SPX + 21, COMP + 12). VIX option volume is above average today at 564,513 contracts, which puts the index at the #10 spot on the "Top Volume by Underlying" list. The volume put/call ratio is currently 0.28 with the highest volume contract being the August 20^th 45.00 call (volume is 80,221 vs. open interest of 36,884).