Today's Options Market Update

Wall Street pared early losses and Treasury yields fell modestly after a pivotal inflation reading delivered a positive surprise. Both core and headline Personal Consumption Expenditures (PCE) prices rose 0.1% in November, compared with analyst consensus of 0.2% for each, some rare good news on inflation after a week dominated by price fears. Core extracts food and energy prices.

Though major U.S. indexes are off their worst overnight levels, they're still lower after a rally effort sputtered into oblivion yesterday amid continued reverberations from Wednesday's Federal Reserve-related sell off in stocks and Treasuries. The charts suffered major damage this week that could take time to repair. Major indexes are on pace to lose about 3% for the week and volatility spiked early Friday on quarterly options expiration day, a session traditionally associated with heavy trading.

Beyond technical matters, investor nerves flared as Congress scrambled for a temporary funding measure through March by tonight's midnight deadline after multiple failed attempts. While shutdowns haven't historically had a major market impact, certain stocks like defense contractors and insurers that rely on federal spending might be prone to weakness in an extended shutdown. Longer term, chaos on Capitol Hill isn't a good sign for President-elect Trump's ambitious 2025 agenda, said Michael Townsend, Schwab's managing director for legislative and regulatory affairs. "In January, the Republican majority in the House will be even smaller than it is now," Townsend noted, "and it could be difficult to wrangle Republicans on key issues like taxes."

The 10-year U.S. Treasury yield (TNX) is down slightly to 4.51%.

The U.S. Dollar Index ($DXY) is also moving lower to 108.09.

The CBOE Volatility Index^® (VIX) is down to 19.60.

WTI Crude Oil (/CL) is dropping 0.45% to $69.06 per barrel.

Bitcoin (BTC) is down 2.80% to $93,829.

Source: Schwab Center for Financial Research

Shares of IONQ Inc. (IONQ + $7.52 to $45.28) are up nearly 20% today, propelling the shares to an all-time high after multiple analysts raised their price-targets for the quantum computing service company.  Analysts at both DA Davidson and Craig-Hallum upped their price targets to $50.00 and $45.00 respectively. The DA Davidson analyst, Alexander Platt, specifically cited the company's ability to "leverage stable atomic properties for greater precision and extended performance times that reduces errors and enables more complex calculations," as a major factor differentiating the company's offering from competitors in a sector that is set to benefit from rapid expansion.

Shares of IONQ are already up 240% year-to-date with most of the gains occurring from a post-election bump which saw the shares rally $30.00, or 181% in one month's time.

Option trading in IONQ currently stands at 103,976 contracts, 3x the daily average, with calls outpacing puts nearly 2:1. Leading the way are the following trades, expirations, and strikes:

• December 20th, 2024, 45.00 call accounted for 3,807 contracts; open interest is 3,892 contracts.
• December 27th, 2024, 64.00 call accounted for 3,802 contracts; open interest is 5,451 contracts.
• January 17th, 2025, 30.00 call accounted for 3,346 contracts; open interest is 8,762 contracts.

New 52-week highs (41 new highs today): IONQ Inc. (IONQ + $7.52 to $45.28), My Size Inc. (MYSZ + $4.03 to $5.39), Nvni Group Limited (NVNI + $0.94 to $3.61), Aadi Biosciences Inc. (AADI + $0.08 to $2.40), Mission Produce Inc. (AVO + $2.59 to $14.91), SLM Corp. (SLM + $0.65 to $28.12)

Unusual call activity is noted today in European Wax Center Inc. (EWCZ + $0.02 to $5.27), as call volume currently stand at 26,131 contracts, 67x the average daily volume in early morning trading. Most of the activity comes from two trades, a closing of a long call butterfly in the January 17th, 2025 expiration and an opening of a long call vertical in the March 21st, 2025, expiration. Traders closed what appears to be a long position of 3,000 of the January 17th 5.00 / 7.00 / 9.00 call butterflies. This position would have benefitted from a rally to the 7.00 strike prior to the January expiration. The opening in the long 6.00 / 9.00 call vertical in the March 21st expiration suggests there still exists a bullish bias, but the traders are looking to extend the duration. As mentioned, the March call vertical purchase is a new position, given the collective open interest of 2,300 contracts (suggesting bullish intent).

Other call activity of note can be seen today in Carrier Global Corp. (CARR + $2.55 to $69.02), as call activity has spiked to 7,421 contracts in morning trading (9x daily average). Volume is strongest in the January 17th, 2025, expiration month and is being led by sales of the 75.00 strike calls. Traders have sold through multiple block trades over 6,000 of the 75.00 strike calls at prices ranging from $0.30 - $0.35 with the majority at or near the bid. Shares of CARR are up over 3.70% today and are sitting just slightly above their 200-day SMA price of $68.10. It is possible traders believe today's rally and any subsequent rally in the shares will stall out around the 75.00 strike price. This suggests neutral to bearish intent.

Shares of Novo Nordisk A/S (NVO - $18.47 to $84.97) are down over 16% today, the biggest intraday drop on record, after the pharmaceutical company announced underwhelming results for its experimental obesity shot. Per Bloomberg, Novo's experimental obesity shot CagriSema helped patients lose an average of 20.4% of their weight over 68 weeks, short of the 25% weight loss that Novo had repeatedly predicted for its next-generation product. These results were roughly in line with its main competitor, Eli Lilly's Zepbound shot, which is already on the market. These results make it difficult for Novo to position the superiority of its drug to that of its rival. 
Novo had hoped that positive results in the study for CagriSema would help it fend off a growing roster of competitors, led by Eli Lilly, in a weight-loss market that's predicted to grow to nearly $130 billion by 2030.

Option trading in NVO currently stands at 137,132 contracts, 5x the daily average, with calls outpacing puts 2:1. Leading the way are the following trades, expirations, and strikes:

• January 3rd, 2025, 110.00 call accounted for 6,974 contracts; open interest is 9,876 contracts.
• December 20th, 2024, 85.00 call accounted for 6,819 contracts; open interest is 43 contracts.
• December 27th, 2024, 90.00 call accounted for 6,138 contracts; open interest is 97contracts.

New 52-week lows (291 new lows today): Novo Nordisk A/S (NVO - $18.47 to $84.97), Color Star Tech (ADD - $0.11 to $2.34), Innovative Industrial Properties (IIPR - $20.31 to $75.03), Fingermotion Inc. (FNGR - $0.71 to $1.29)

Some unusual put activity is noted today in Nutrien Ltd. (NTR + $1.08 to $45.12). This activity equates to over 20,911 put contracts, 22x average daily put volume. Much of the activity can be attributed to a put diagonal trade that occurred between the December 27th, 2024, and the January 31st, 2025, expiration months. Traders rolled their long puts down from the December 27th 44.00 strike to the January 31st 41.00 strike and paid $0.10 for the additional month of duration. In many occasions, traders will roll down their long option positions, in this case the 44.00 strike puts, when that strike is in-the-money. That's exactly what occurred today, when the NTR share price hit an intraday low, and 52-week low, price of $43.87.  This could indicate the traders would like to take some of their short delta risk off while still maintaining a bearish position for an additional month.

Unusual put activity can also be seen in Fabrinet (FN + $0.96 to $223.70), as put volume stands at 3,252 contracts in morning trading, 300x average daily volume. Nearly all of that volume can be attributed to a (ratio) put diagonal spread that was purchased incorporating both the January 17th, and February 21st, 2025, expiration months. Traders bought 1,280 of the February 21st 200.00 strike puts and sold 1,920 of the January 17th 210.00 strike puts for a net debit of $1.48 per spread. This trade is semi-bearish in nature and expands to its maximum profit at the $210.00 price level by the January expiration, as is the case with most time spreads. Time spreads usually expand in value at the short strike, if the share price doesn't move too far below that level prior to the January 17th expiration date. FN shares are hovering near their 200-day SMA price of $221.00.

The Cboe Volatility Index (VIX - 4.49 to 19.60) has traded on both sides of the unchanged line today, as equity markets are moving higher in morning trading (DJI + 630, SPX + 80, COMPX + 265). VIX movement has occurred within a wide range today (the intraday range is 17.89 – 26.51). VIX option volume is elevated today, given its ninth spot in the "Top Volume by Underlying" list. The volume put/call ratio is currently 1.31, and the highest volume contract is the January 22nd, 2025, 17.00 put (volume is 88,444 vs. open interest of 239,500).