Today's Options Market Update

Major indexes mostly fell early thanks to the usual suspects: rising Treasury yields and crude oil. Attacks on Saudi Arabia's oil facilities earlier today, tit-for-tat strikes between Iran and the U.S., growing trade tensions with Canada, and rising prospects of central bank hikes combined forces in a stiff headwind, though 10-year note yields eased from early highs above 4.8%.

Before the holiday weekend, Friday's U.S. August jobs report showed three times the expected growth at 162,000. The three-month average near 71,000 looked relatively solid. Today is light on data, but things get interesting Thursday and Friday with August U.S. inflation readings. Overseas, the yen surged on Japan's stronger gross domestic product, hurting the dollar and reinforcing ideas that the Bank of Japan could raise rates next week. That's one source of pain for U.S. Treasuries today.

Major indexes eased Friday to finish a roughly flat week after a series of strong tech-related earnings reports and mostly solid data. Rate hike probabilities rose following the jobs report, which appears to be due to a belief that a healthy labor market will make it easier for the Fed to move forward with rate hikes.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is essentially flat at 4.782%.

The U.S. Dollar Index ($DXY) is lower by 0.37 at 98.80.

WTI Crude Oil (/CL) October futures are higher by 1.36% to $92.72/barrel.

Gold prices have traded in a range of $4,426.20-4,488.80 and were last seen trading lower by ~0.92% to $4,435.40/oz.

Natural Gas prices for September futures have traded in a range of $2.878-3.014 today and were last seen trading lower by 3.19% to $2.88.

Bitcoin (BTC) is lower by ~0.37% over the last 24 hours to $78,522.22 today.

Shares of Qualcomm Inc. (QCOM + $8.26 to $177.00) are gapping up this morning after the chip maker announced a multi-generation AI chip collaboration with Amazon to build data center infrastructure. The two companies will also collaborate on advanced optical connectivity solutions to support high-bandwidth interconnects within Amazon data center networks. Calls are outpacing puts nearly 5:1 with the September 11^th 200.00 call seeing the most action from traders (volume is 17,949).

Also trading to the upside this morning is Lockheed Martin Corp. (LMT + $9.47 to 534.75) after UBS upgraded the defense contractor to “Buy” from “Neutral” and hiked their price target on the stock to $674.00 from $581.00. Analysts at UBS cited durable earnings growth, rising missile demand, F-35 sustainment and other defense programs which should support a multi-year expansion. Calls are outnumbering puts better than 2:1 with the September 11^th 350.00 call being the highest volume contract (volume is 139).

New 52-week highs (53 new highs today): ConocoPhillips Inc. (COP + $1.48 to $135.74), Deutsche Bank AG (DB + $0.70 to $41.20), Marathon Petroleum Inc. (MPC + $7.56 to $396.46)

Some unusual call activity (~20:1 calls over puts on 5x average daily volume at midday) is being seen in Tractor Supply Company (TSCO + $0.42 to $35.41) as option traders primarily target the September 11^th 36.00 call. Volume on this contract is 5,985 versus open interest of 409, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.30-0.35 each (including two 1,640 contract blocks that were bought around the same time at the ask price of $0.35), which suggests bullish intent.

Shares of Novartis AG (NVS - $20.13 to $139.86) are gapping down this morning after the drug maker announced late Friday that its cholesterol drug (pelacarsen) failed to meet the primary endpoints in a Phase 3 study. Results from the critical study showed that pelacarsen, which is designed to lower lipoprotein (a), didn’t reduce the risk of serious cardiovascular events, including heart attacks and stroke.  Puts are outnumbering calls ~2:1 with the September 18^th 145.00 put being the highest volume contract (volume is 1,853).

Also trading to the downside this morning is Best Buy Inc. (BBY - $2.27 to $88.00) after DA Davidson downgraded the consumer electronics retailer to “Neutral” from “Buy” and put a $95.00 price target on the stock. Analysts at DA Davidson acknowledged solid fundamentals, but believe valuation is stretched following a 35% year-to-date rally in the stock. Calls are outnumbering puts roughly 2:1 with the October 16^th 90.00 call garnering the most attention from traders (volume is 644).

New 52-week lows (89 new lows today): Coupang Inc. (CPNG - $0.36 to $14.93), McDonald’s Corp. (MCD - $0.16 to $255.53), Winmark Corp. (WINA - $7.17 to $311.00)

Some unusual put activity (~15:1 puts over calls) is being seen in Monday.com Ltd. (MNDY - $4.32 to $86.75) which is primarily being driven by a 5,450 contract block that was sold on the November 20^th 65.00 put for $2.42 when the bid/ask spread was $2.40 x $2.90 (open interest is 126). We know that this block is a new position based on the open interest figure, and the put sales suggests that the block trader believes that MNDY will close above the $65.00 price level and/or is comfortable taking a long 545,000 share position in the stock at an effective purchase price of $63.58 if MNDY closes below $65.00 at expiration.

Brookfield Renewable Corp. (BEPC + $1.20 to $32.95): Option volume is running at ~128x the daily average on this renewable energy producer as option traders primarily target the September 18^th 35.00 call. Volume on this contract is 4,795 versus open interest of 418, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.10-0.20 each, which suggests bullish intent.

GFL Environmental Inc. (GFL - $0.65 to $43.08): Option volume is running at ~25x the daily average on this provider of non-hazardous solid waste management and environmental services which is primarily being driven by a couple of large blocks that simultaneously traded on the December 18^th expiration earlier this morning:

• 45.00 call (open interest is 283): A 12,500 contract blocks was bought for $2.78 when the bid/ask spread was $1.60 x $3.50.
• 50.00 call (open interest is 1,925): A 12,500 contract block was sold for $1.13 when the bid/ask spread was $0.85 x $1.60.

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 $1.65 (x 12,500 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes GFL will close above the break-even price of $46.65 at expiration.

BKV Corp. (BKV + $0.74 to $26.80): Option volume is running at ~14x the daily average on this natural gas producer as option traders primarily target the September 18^th 30.00 call. Volume on this contract is 5,041 versus open interest of 731, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.15-0.25 each, which suggests bullish intent.

The Cboe Volatility Index (VIX + 0.03 to 15.33) has been on both sides of the unchanged line today (the intraday range is 15.29-15.94), as equity markets are lower across the board around the midday mark (DJI - 591, SPX - 30, $COMP - 38, RUT - 4). VIX option volume has been above average today at 583,440 contracts, and calls are outpacing puts better than 3:1 so far today.