Today's Options Market Update

Futures based on the S&P 500® Index (SPX) fell to a three-and-a-half-month low overnight and were down slightly shortly before the U.S. market open. Futures based on the Nasdaq 100 (NDX) and Dow Jones Industrial Average (DJI) were also modestly lower. That suggests the market's four-day losing streak could extend to five. Last Friday, an early rally attempt belly-flopped, leaving the SPX down roughly 3% for the week—its worst weekly performance since March.

A "trifecta of trouble" that bedeviled investors much of this month—rising Treasury yields, rising oil prices, and ongoing strength in the U.S. dollar—likely will continue to burden equities at the start of this week, says Kevin Gordon, senior investment strategist at Schwab. Treasury yields climbed overnight, with the 10-year note near a 16-year high around 4.51%.

A hawkish tone struck by the Federal Reserve following its policy meeting last week appeared to deflate investor spirits, as the central bank suggested another interest rate hike may be coming. A potential U.S. government shutdown October 1 further complicates the picture. Volatility readings that have jumped to one-month highs convey stepped-up market skittishness.

Last Friday was particularly rough for the market, marking the second day in a row that the S&P 500 closed beneath key intermediate-term technical support near the August low of around 4,335. Additionally, Friday represented the second consecutive settlement below the 100-day moving average, a level the SPX hadn't closed below since March. The tech-heavy Nasdaq-100 experienced the same. Technical softness may result this week if the recent weakness spills over.

The S&P 500 is down 4.2% for the month and down 3% for the quarter with five trading days left, putting it on pace for its first losing quarter since Q2 of 2022. The S&P 500 is still up 12.5% for the year, but down 6% from its July 31 closing high.

The 10-year Treasury note yield ($TNX) is up ~8 basis points to 4.521%. The U.S. Dollar Index ($DXY) is higher by 0.46 to 106.05. The Cboe Volatility Index® ($VIX) has been in positive territory all day today and was last seen higher by 0.18 at 17.38. WTI Crude Oil (/CL) is down 0.42% to $89.65 per barrel. Gold prices have traded in a range of $1,933.80 to $1,946.80 and were last seen trading lower by 0.50% to $1,935.80. Natural Gas prices have traded in a range of $2.61-2.671 so far today and were last seen trading higher by 0.99% to $2.663/MMBtu.

Source: Schwab Center for Financial Research

Shares of CarMax Inc. (KMX + $2.19 to $78.85) are moving higher this morning after Wedbush upgraded the used car retailer to "Outperform" from "Neutral" and bumped their price target on the stock to $90.00 from $85.00, citing improved growth, profitability, and market share potential. The upgrade comes ahead of the company's Q2 earnings report which is scheduled to be released this Thursday before the bell. Puts are outnumbering calls ~3:2 with the September 29^th 65.00 put seeing the most action from traders (volume is 353).

Also trading to the upside this morning is Dow Inc. (DOW + $1.05 to $51.30) after J.P. Morgan upgraded the chemical maker to "Overweight" from "Neutral" while maintaining their $55.00 price target on the stock, noting the stock's attractive dividend yield of 5.6%. The upgrade comes ahead of the company's Q2 earnings report which is scheduled to be released this Thursday before the bell. Calls are outnumbering puts ~3:1 with the September 29^th 51.00 call leading the way (volume is 523).

New 52-week highs (24 new highs today): Elastic N.V. (ESTC + $1.13 to $80.69), Murphy USA Inc. (MUSA + $1.22 to $343.22), Williams-Sonoma Inc. (WSM + $11.94 to $151.95)

Some unusual call activity (~11:1 over puts) is being seen in uranium producer Energy Fuels Inc. (UUUU + $0.62 to $8.82) which is primarily being driven by activity on the January 2024 11.00 call. Volume on this contract is 4,360 versus open interest of 859, so we know that the volume primarily represents fresh positioning. The bulk of the activity on this contract mostly consisted of various-sized blocks that were being bought at various times at the ask price of $0.40 each, which suggests bullish intent.

Shares of Dow-component Nike Inc. (NKE - $0.33 to $90.52) are trading slightly lower after Jefferies downgraded the athletic apparel retailer to "Hold" from "Buy" and cut their price target on the stock to $100.00 from $140.00. Analysts at Jefferies said that the company's wholesale channel is likely to remain under pressure and believes that growth in China will be challenged due to macro headwinds. Shares of NKE hit an 11-month low of $89.79 earlier in the trading session. Puts are outnumbering calls ~3:2 with the October 20^th 88.00 put seeing the most action from traders (volume is 4,501).

Also trading to the downside this morning is Morphic Holding Inc. (MORF - $5.04 to $31.63) after BTIG research downgraded the biopharmaceutical company to "Neutral" from "Buy". Shares of MORF dropped over 25% on Friday after reporting data related to the company's induction therapy (MORF-057) to treat severely active UC. Calls are outnumbering puts ~3:2 with the October 20^th 35.00 call leading the way (volume is 608).

New 52-week lows (348 new lows today): Alcoa Corp. (AA - $1.63 to $26.72), Crown Castle Inc. (CCI - $0.44 to $91.54), SolarEdge Inc. (SEDG - $1.93 to $132.67)

Some unusual put activity (~18:1 over calls) is being seen in ChargePoint Holdings Inc. (CHPT - $0.03 to $4.99) which is primarily being driven by a couple of large blocks that simultaneously traded on the October 6^th expiration earlier this morning:

• 5.00 put (open interest is 9,819): A 50,000 contract block was bought at the ask price of $0.34.
• 4.00 put (open interest is 149): A 50,000 contract block was sold at the bid price of $0.06.

We know that both of these blocks are new positions based on the respective open interest figures and it appears that a $1.00 wide bear put spread was established for a net debit of $0.28 (x 50K contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that CHPT will close below the break-even price of $4.72 at expiration.

Compania de Minas Buenaventura S.A.A. (BVN + $0.01 to $8.55): Option volume is running at ~85x the daily average on this precious-metals miner which is primarily being driven by a 50,000 contract block that was sold on the November 17^th 8.00 put at the bid price of $0.30 (open interest is 0). We know that this block is a new position based on the open interest figure and we can assume that the block trader believes that BVN will close above the $8.00 price level and/or is comfortable taking a long 5M share position in the stock at an effective purchase price of $7.70 in the event that BVN closes below $8.00 at expiration.

Domo Inc. (DOMO - $0.01 to $9.56): Option volume is running at ~4x the daily average on this cloud-based business intelligence platform operator as option traders primarily target the December 15^th 7.00 put. Volume on this contract is 7,767 versus open interest of 1, so it's likely that nearly all of the volume represents fresh positioning. The bulk of the transactions on this contract consisted of various mid-sized blocks that were being sold at various times at the bid price of $0.20 each. The positioning suggests that the put sellers believe that DOMO will close above the $7.00 price level and/or is comfortable taking a long position in the stock at an effective purchase price of $6.80 in the event that DOMO closes below $7.00 at expiration.

Takeda Pharmaceutical Company Ltd. (TAK + $0.12 to $15.96): Option volume is running at ~4x the daily average on this drug maker as option traders primarily target the November 17^th 17.50 call. Volume on this contract is 1,120 versus open interest of 566, so we know that the volume primarily represents fresh positioning. The bulk of the activity on this contract consisted of various-sized blocks that were being bought at various times the ask price of $0.10 each, which suggests bullish intent.

The Cboe Volatility Index (VIX + 0.18 to 17.38) has been in positive territory all day today (the intraday range is 15.10-16.68) as equity markets are lower across the board around the mid-day mark (DJI - 138, SPX - 39, COMPX - 134). VIX option volume has been above average today at 890,962 contracts, which puts the index at the #6 spot on the “Top Volume by Underlying” list. The volume put/call ratio is currently 0.59, but the highest volume contract is the October 18^th 17.00 put (volume is 75,770 vs. open interest of 64,074).

Interested in receiving notifications of intraday unusual option trades? Follow Schwab’s Managing Director of Trading & Derivatives Randy Frederick on X (formerly Twitter) @RandyAFrederick who will be posting unusual options trades as he sees them throughout the day.