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Today's Options Market Update

Dow, S&P push higher into record territory, buoyed by earnings & data.

U.S. equities are higher in midday action with investors sifting through a slew of earnings results amid a revved-up Q3 earnings season, as well a host of economic data. Facebook became the first tech heavyweight to post quarterly results, beating on the bottom line, but falling short on revenues, while General Electric and Dow member 3M Company also topped the Street's forecasts. Supply-chain challenges remain a persistent theme among the commentary from those reporting. On the economic front, consumer confidence surprised to the upside and new home sales jumped, a read on regional manufacturing moved back into expansionary territory, but housing prices fell short of estimates. Treasuries are mostly lower, and the U.S. dollar is nudging to the upside, while gold is losing ground and crude oil prices continue to move higher. Asia finished mixed amid fresh worries over property stocks, while Europe is seeing widespread gains as investors parse a busy earnings calendar in the region.

At 10:53 a.m. ET, the Dow Jones Industrial Average is up 0.3%, the S&P 500 Index is gaining 0.6%, and the Nasdaq Composite is rising 1.0%. WTI crude oil is rising $0.56 to $84.30 per barrel, Brent crude oil is $0.25 higher at $85.42 per barrel. The gold spot price is falling $18.10 to $1,788.60 per ounce, and the Dollar Index—a comparison of the U.S. dollar to six major world currencies—is edging 0.1% higher to 93.89. Natural Gas prices have traded in a range of $5.646-6.091 and were last seen trading lower by $0.243 (or -4.12%) to $5.655/MMBtu.

Source: Schwab Center for Financial Research

Today’s Bullish Activity

Multiple names are moving higher following upbeat earnings announcements:

  • Hasbro Inc. (HAS + $4.56 to $93.06): The toy maker reported Q3 earnings of $1.96 per share, excluding non-recurring items ($0.26 beat) on revenue that rose 10.9% year-over-year to $1.97B (in-line with estimates). In terms of guidance, the company guided fiscal-year 2021 revenue to a range of ~$6.18-6.34B versus the $6.24B consensus estimate. Calls are outnumbering puts roughly 2:1 with the November 5th 89.00 call being the most actively traded contract (volume is 574).
  • Medpace Holdings Inc. (MEDP + $21.62 to $210.00): The provider of clinical research-based drug and medical device development services reported Q3 earnings of $1.29 per share ($0.15 beat) on revenue that rose 28.3% year-over-year to $295.57M (above the $291.55M expected). Looking ahead, the company raised its fiscal-year 2021 GAAP EPS forecast to a range of $4.66-4.77 (from $4.31-4.50) and FY2021 revenue forecast to a range of $1.135-1.145B (from $1.11-1.15B). Calls are slightly outnumbering puts, but the November 19th 210.00 put is the most actively traded contract (volume is 188).
  • United Parcel Service Inc. (UPS + $14.87 to $218.63): The package delivery company reported Q3 earnings of $2.71 per share, excluding non-recurring items ($0.16 beat) on revenue that increased 9.2% year-over-year to $23.18B (above the $22.57B expected). In terms of guidance, for the full year 2021, the company is raising its consolidated adjusted operating margin target to ~13.0%, expects adjusted return on invested capital to be ~29%, expects capital expenditures to be ~$4.2B with the company’s effective tax rate expected to be ~22.5%. Calls are outnumbering puts roughly 3:2 with the October 29th 220.00 call topping the most actives list (volume is 5,747).

 

New 52-week highs (156 new highs today): Advanced Micro Devices Inc. (AMD + $4.12 to $126.48), Bank of America Corp. (BAC + $0.48 to $47.99), Nvidia Corp. (NVDA + $19.29 to $250.95)

Notable Call Activity

Some unusual call activity (~12:1 over puts) is being seen in Penn National Gaming Inc. (PENN + $0.67 to $74.97) as option traders primarily target the October 29th 80.00 call. Volume on this contract is 29,815 versus open interest of 3,765, so we know that this primarily represents new positioning. The transactions mostly consisted of various-sized blocks that were being bought at various times for between $0.35 and $0.60 each, which suggests bullish intent. Note: PENN is scheduled to report Q3 earnings on November 4th before the market opens, so this positioning does not capture the potential impact of that event.

Today’s Bearish Activity    

Several stocks are trading to the downside following quarterly earnings announcements/guidance:

  • Facebook Inc. (FB - $6.57 to $322.12): The social media giant reported mixed quarterly results and provided weak guidance last night after the bell. The company posted Q3 earnings of $3.22 per share ($0.04 beat) on revenue that rose 35.1% year-over-year to $29.01B (below the $29.52B consensus estimate) with daily active users (DAUs) increasing 6% year-over-year to 1.93B during the month of September. In terms of guidance, the company guided Q4 revenue to a range of $31.5-34.0B, which is below the $34.82B analysts had modeled. Facebook said that tepid outlook reflects the significant uncertainty related to Apple’s iOS 14 changes along with the macroeconomic and COVID-related factors. Calls are outnumbering puts ~4:3 with the October 29th 330.00 call topping the most actives list (volume is 22,066).
  • Lockheed Martin Corp. (LMT - $38.83 to $337.50): The aerospace and defense giant reported Q3 earnings of $2.21 per share ($0.25 beat) on revenue that declined 3.03% year-over-year to $16.00B (below the $17.1B consensus estimate). Looking ahead, the company revised its 2022 adjusted EPS guidance to $27.17 (above prior guidance of $26.70-27.00) on revenue that is expected to be ~$67.0B (below the prior guidance of $67.3-68.7B). Calls are slightly outnumbering puts with the October 29th 350.00 call leading the way (volume is 1,125).
  • Waste Management Inc. (WM - $4.69 to $156.46): The provider of residential and commercial waste management environmental services reported Q3 earnings of $1.26 per share, excluding non-recurring items ($0.10 miss) on revenue that rose 20.8% year-over-year to $4.67B (above the $4.55B expected). The company issued upside guidance as fiscal-year 2021 revenue is expected to come in a range of $17.81-17.88B versus the $17.66B. Calls are outnumbering puts ~2:1 with the November 19th 170.00 call being the most actively traded contract (volume is 300).

 

New 52-week lows (35 new lows today): Chegg Inc. (CHGG + $0.28 to $59.09), Casper Sleep Inc. (CSPR - $0.06 to $3.97), Takeda Pharmaceuticals Inc. (TAK - $0.13 to $13.89)

Notable Put Activity

SPDR S&P Metals & Mining ETF (XME - $0.16 to $45.54): A 3,000 contract block was bought on the November 19th 43.50 put for $0.78 when the bid/ask spread was $0.70 x $0.80 (open interest is 2,072).  We know this block is a new position based on the open interest figure and we can assume the intent is bearish in nature since the trade took place above the midpoint of the bid/ask spread.

Texas Instruments Inc. (TXN - $2.47 to $197.73): A 1,500 contract block was bought on the December 17th 180.00 put at the ask price of $2.19 (open interest is 787).  We know this block is a new position based on the open interest figure and we can assume the intent is bearish in nature since the trade took place at the ask price.  

Volume Signals

Tesla Inc. (TSLA + $17.41 to $1,042.27): The most actively traded option contract in the market today is the TSLA 10/29/2021 1100.00 C as volume is 153,061 versus open interest of 27,805 (suggesting that this primarily represents new positioning). Contracts were exchanging hands for anywhere between $6.94 and $33.40 each. Earlier in the trading session TSLA hit an all-time high of $1,094.94.

Redball Acquisition Corp. (RBAC + $0.39 to $10.33): Option volume is running at roughly 35x the daily average of 3,114 contracts on this Special Purpose Acquisition Company (SPAC) which is primarily being driven by activity on the November 19th 10.00 call. Volume on this contract is 27,931 versus open interest of 8,415, so we know that this primarily represents new positioning. The majority of the activity on this contract consisted of various-sized blocks that were being bought at various times at the ask prices of $0.35, $0.40, $0.45, $0.50 and $0.55 each, which suggests bullish intent. Note: Back on October 13th online ticketing firm SeatGeek agreed to go public via a merger with RBAC.   

Endeavor Group Holdings Inc. (EDR + $1.16 to $26.02): Option volume is running at over 30x the daily average of 782 contracts on this global sports and entertainment company which is primarily being driven by three large blocks that were seen simultaneously trading on the November 19th expiration earlier this morning:

  • 30.00 call (open interest is 6,080) – A 2,500 contract block was bought for $0.40 when the bid/ask spread was $0.30 x $0.45. 
  • 25.00 call (open interest is 318) – A 2,500 contract block was sold for $1.90 when the bid/ask spread was $1.85 x $2.10.
  • 22.50 put (open interest is 207) – A 2,500 contract block was sold for $0.35 when the bid/ask spread was $0.30 x $0.70.

Assuming all of these blocks are new positions based on the respective open interest figures and it appears that the block trader established a short strangle plus a long call leg for protection, for an overall net credit of $1.85 (x 2,500 contracts x 100 multiplier, excluding commissions), which suggests that the block trader believes that EDR will close in-between the upper break-even price of $26.85 and the lower break-even price of $20.65 at expiration. 

TJX Companies Inc. (TJX + $0.71 to $65.97): A couple of large blocks were seen simultaneously trading on this discount retailer on the November 5th expiration earlier this morning:

  • 65.00 call (open interest is 124) – A 5,000 contract block was bought at the ask price of $1.37.
  • 68.00 call (open interest is 73) – A 7,500 contract block traded for $0.21, directly in the middle of the $0.16 x $0.26 bid/ask spread.

We know these blocks are new positions based on the respective open interest figures and (since the 65.00 block trade took place at the ask price) it appears that a bull call spread was established (in a 2:3 ratio) for a net debit of $1.055 (x 5,000 contracts x 100 multiplier, excluding commissions), which suggests that the block trader believes that TJX will close above the break-even price of $66.055 at expiration. Note: TJX is slated to report Q3 earnings on November 17th before the market open, so this positioning does not capture the potential impact of that event.  

International Game Technology PLC (IGT + $0.41 to $30.17): A couple of large blocks were seen simultaneously trading on this gaming technology company on the November 19th expiration earlier this morning:

  • 31.00 call (open interest is 7,017) – A 15,000 contract block was bought for $1.55 when the bid/ask spread was $1.45 x $1.60.
  • 37.00 call (open interest is 7) – A 15,000 contract block was sold for $0.24 when the bid/ask spread was $0.20 x $0.30.

We know these blocks are new positions based on the respective open interest figures and it appears that a $6.00-wide bull call spread was established for a net debit of $1.31 (x 15,000 contracts x 100 multiplier, excluding commissions), which suggests that the block trader believes that IGT will close above the break-even price of $32.31 at expiration. Note: IGT is scheduled to report Q3 earnings on November 9th before the market open, and also has a virtual Investor Day on November 17th, so this positioning captures the potential impact of both of these events.  

Gauging Volatility

The CBOE Volatility Index (VIX + 0.82 to 16.06) has been on both sides of the unchanged line today (the intraday range is 14.90-16.11) as equity markets are higher across the board around the mid-day mark today (DJI + 55, SPX + 16, COMPX + 57). VIX option volume has been tepid as the index is currently missing from the top 10 most actives list. The most actively traded contract is the November 17th 19.00 put as volume is 27,582 versus open interest of 95,595. 

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.

What You Can Do Next

  • Schwab clients: Contact a Trading Specialist at 800-435-9050 for questions or log in to the Schwab Learning Center.

  • Not yet a client? Learn more about Schwab Trading Services

Important Disclosures

Benchmarks by TradeWeb Market Data 

Schwab Center for Financial Research ("SCFR") is a division of Charles Schwab & Co., Inc. This material includes information obtained from third-party sources and believed to be reliable, but its accuracy or completeness is not guaranteed. This report is for informational purposes only and is not a solicitation, or a recommendation that any particular investor should purchase or sell any particular security. The investment information mentioned here may not be suitable for everyone. Each investor needs to review an investment strategy for his or her own particular situation before making any investment decision. All expressions of opinions are subject to change without notice in reaction to shifting market conditions. 
 
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. 


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All references to subjects (securities, indexes, futures contracts, and options contracts) were derived based on screens conducted by the writer for certain anomalous activity such as volumes, volatility and other related market data. As needed for brevity, the writer may have applied discretion when choosing among screen outputs for inclusion. Such discretion may have been based on news reports or other considerations of public interest. The views or opinions are those of the writer, and are subject to change without notice. All referenced subjects were chosen for illustrative purposes only and should not be considered recommendations, offers to sell, or solicitations of offers to purchase.

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