U.S. stocks are mixed as the markets sift through a plethora of data and continue to wrestle with the implications of persisting inflation and a tight labor market on Fed monetary policy aggressiveness. Retail sales rose much more than anticipated in January, which may be further complicating the matter, homebuilder sentiment improved by the most since the summer of 2013, and business inventories continued to rise. However, industrial production came in below forecasts, mortgage applications dropped, and New York manufacturing remained in contraction territory. Q4 earnings season continues to roll on, with Airbnb topping estimates and offering upbeat guidance, and Kraft Heinz also exceeding earnings estimates, while Devon Energy missed profit projections. Treasury yields are mostly higher, and the U.S. dollar is rallying. Crude oil and gold prices are lower. Asia finished mostly lower, and Europe is trading mostly to the upside.
At 12:23 p.m. ET, the Dow Jones Industrial Average and the S&P 500 Index are down roughly 0.5%, while the Nasdaq Composite is higher by 0.05%. WTI crude oil is losing $0.92 to $78.14 per barrel, and Brent crude oil is declining $1.03 at $84.55 per barrel. The gold spot price is falling $22.20 to $1,843.20 per ounce, and the Dollar Index is advancing 0.7% to 103.97. Natural Gas prices have traded in a range of $2.493-2.607 and were last seen trading lower by $0.037 (or - 1.44%) to $2.53/MMBtu.
Source: Schwab Center for Financial Research
Today’s Bullish Activity
Shares of Airbnb Inc. (ABNB + $14.23 to $135.10) are gapping up to a nine-month high this morning after the homestay rental platform reported Q4 earnings of $0.48 per share ($0.23 beat) on revenue of $1.90B (above the $1.86B consensus estimate) as Q4 bookings for nights and experience increased 20% year-over-year (YoY). Looking ahead, the company said that Q1 revenue is expected to come in a range of $1.75-1.82B (above the $1.69B consensus estimate) and expects to maintain last year’s margin of 35%, which represents the highest % since the company went public back in 2020. Calls are outnumbering puts ~5:4 with the February 17th 135.00 call being the highest volume contract (volume is 13,311).
Also trading to the upside is Analog Devices Inc. (ADI + $10.68 to $193.22) after the chipmaker reported fiscal Q1 earnings of $2.75 per share, excluding non-recurring items ($0.15 beat) on revenue that rose 21.1% year-over-year to $3.25B (above the $3.15B consensus estimate). Additionally, the company issued upside guidance as Q2 EPS is expected to come in a range of $2.65-2.85 on revenue that is expected to come in a range of $3.1-3.3B, which is above the respective $2.42 and $3.04B consensus estimates. Calls are outnumbering puts ~2:1 with the February 17th 200.00 call seeing the most action from traders (volume is 913).
New 52-week highs (28 new highs today): Cadence Design Systems Inc. (CDNS + $0.86 to $199.95), Owens Corning Inc. (OC + $1.14 to $104.55), Vulcan Materials Company (VMC + $9.58 to $195.16)
Notable Call Activity
Some unusual call activity (~9:1 over puts) is being seen in Norwegian Cruise Line Holdings Ltd. (NCLH + $0.41 to $17.86) as option traders primarily target the February 17th 18.50 call. Volume on this contract is 25,634 versus open interest of 2,853, so we know that the activity primarily represents new positioning. The majority of the transactions on this contract consisted of various-sized blocks that were being bought at various times for between $0.13-0.16 each, which suggests bullish intent.
Today’s Bearish Activity
Leading the point decliners list this morning is Lithia Motors Inc. (LAD - $18.18 to $263.12) after the automotive retailer reported Q4 earnings of $9.05 per share ($1.21 miss) on revenue that rose 10.8% year-over-year to $6.99B (below the $7.08B expected). Shares of LAD came within 1% of the 200-day Simple Moving Average ($250.37) earlier in the trading session today. Calls are outnumbering puts ~3:1 with the March 17th 260.00 call being the highest volume contract (volume is 112).
Leading the percentage losers list this morning is Credo Technology Group Holding Ltd. (CRDO - $9.02 to $10.34) after the provider of various high-speed connectivity solutions for optical and electrical Ethernet applications guided Q4 revenue to a range of $30-32M, which is well below the $58.30M analysts had expected. Multiple brokerages lowered their CRDO price targets following the news. Calls are outnumbering puts ~3:1 with the February 17th 12.50 call leading the way (volume is 2,159).
New 52-week lows (37 new lows today): Design Therapeutics Inc. (DSGN - $0.18 to $6.54), Kenon Holdings Ltd. (KEN + $0.22 to $30.772), Wisa Technologies Inc. (WISA - $0.29 to $4.95)
Notable Put Activity
Some unusual put activity (~11:1 over calls) is being seen in Bumble Inc. (BMBL + $0.19 to $23.56) which is primarily being driven by activity on two contracts on the March 17th expiration:
- 20.00 put (volume is 2,335 versus open interest of 1,915): The activity mostly consisted of a 2,000 contract block that was bought at the ask price of $1.00.
- 15.00 put (volume is 8,800 versus open interest of 4,658): The activity mostly consisted of a 4,077 contract block that simultaneously traded for $0.15 and (at the same time) a 2,718 contract block that was sold for $0.10 when the bid/ask spread was $0.10 x $0.20.
It’s difficult to be certain what is happening here (it could be a ratio bear put spread or a long put roll-up from the 15.00 to the 20.00 strike) but we know that the block trade on the 20.00 put is a new position based on the open interest figure, and we can assume that the intent is bearish in nature since the trade took place at the ask price.
Volume Signals
TechnipFMC PLC (FTI - $0.14 to $13.93): Option volume is running at ~9x the daily average on this provider of oil & gas projects, technologies and systems which is primarily being driven by a 12,470 contract block that was sold on the March 17th 11.00 put for $0.10 when the bid/ask spread was $0.00 x $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 block trader believes that FTI will close at or above the $11.00 price level, and/or are comfortable taking a long 1,247,000 share position in the stock at an effective purchase price of $10.90 in the event that it closes below $11.00 at expiration.
Upwork Inc. (UPWK + $0.76 to $13.93): Option volume is running at over 5x the daily average on this work marketplace that connects businesses with various independent professionals and agencies, which is primarily being driven by activity on the February 17th 15.00 call. Volume on this contract is 4,785 versus open interest of 761, so we know that the volume primarily represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were being bought at various times at the ask prices of $0.15 & $0.20 each, which suggests bullish intent. The positioning comes ahead of the company’s Q4 earnings report which is slated to be released after the bell today.
Aclaris Therapeutics Inc. (ACRS - $0.17 to $13.08): Option volume is running at over 3x the daily average on this clinical-stage biopharmaceutical company which is primarily being driven by a couple of large blocks that simultaneously traded on the May 19th expiration earlier this morning:
- 15.00 call (open interest is 4,205): A 1,000 contract block was bought for $2.50 when the bid/ask spread was $1.90 x $2.55.
- 12.50 put (open interest is 76): A 1,000 contract block was bought for $2.80 when the bid/ask spread was $1.80 x $2.85.
Assuming both of these blocks are new positions, it appears that a long strangle was established for a net debit of $5.30 (x 1,000 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that ACRS will either close above the upper break-even price of $20.30 or below the lower break-even price of $7.20 at expiration.
Gauging Volatility
The Cboe Volatility Index (VIX - 0.59 to 18.32) has been on both sides of the unchanged line today (the intraday range is 18.22-19.41) as equity markets are mixed around the mid-day mark (DJI - 136, SPX - 12, COMPX + 9). VIX option volume has been above average today at 543,001 contracts, which puts the index at the #6 spot on the “Top Volume by Underlying” list. The volume put/call ratio is currently 0.25 with the highest volume contract being the June 21st 30.00 call (volume is 109,770 vs. open interest of 178,038).
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.
© Charles Schwab
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