Today's Options Market Update

Stocks looked poised to start the holiday-shortened week with solid gains, as chip stocks rose in early trade, after the U.S. and Iran reportedly agreed to the broad outlines of a peace deal, though limited U.S. strikes and Iranian threats of retaliation muddled the outlook a bit. The latest reading on U.S. consumer confidence is due at 10 a.m. ET.

Earnings season is winding down for the quarter, though Dell (DELL), Marvell Technology (MRVL), Salesforce (CRM), and several retailers will have their turns this week. Investors will also have reports to digest on home prices and consumer confidence. Arguably the week's biggest number is April's Personal Consumption Expenditures (PCE) reading, which is due Friday and will provide a key gauge into inflationary pressures for investors and, more notably, the Federal Reserve. Kevin Warsh was officially sworn in as the Fed's 17th chairperson on Friday.

Ahead of the holiday weekend, markets were in moderate rally mode, cementing another weekly gain as hopeful investors digested murmurs of a forthcoming resolution to the Iran war. The Dow tacked on almost 300 points to notch a new record-high close, while the S&P 500 chalked up another winning week—its eighth in a row. It’s encouraging to see fresh all-time highs in both the S&P 500 Equal Weight and the Dow Jones Industrial Average, which are both bullish and indicate a healthy broadening of the rally.

Source: Schwab Center for Financial Research

The 10-year U.S. Treasury yield (TNX) is lower by ~3 basis point to 4.388%.

The U.S. Dollar Index ($DXY) is lower by 0.10 to 99.14.

WTI Crude Oil (/CL) is lower by 3.05% to $94.65/barrel.

Gold prices have traded in a range of $4,533.10-4,615.60 and were last seen trading higher by ~0.029% to $4,557.70/oz.

Natural Gas prices for May futures have traded in a range of $2.859-2.989 today and were last seen trading higher by 2.17% to $2.97.

Bitcoin (BTC) is lower by ~0.64% over the last 24 hours to $76,773.54 today.

Shares of Elbit Systems Ltd. (ESLT + $82.29 to $850.11) are gapping up this morning after the aerospace and defense company reported Q1 adjusted EPS of $3.87 ($0.50 beat) on Q1 revenue that increased 15.26% year-over-year (YoY) to $2.19B (above the $2.14B FactSet consensus estimate). Concurrent with the earnings release, ESLT announced that it won a $1.4B five-year contract with a European customer for extensive military modernization programs. Calls are slightly outnumbering puts with the June 18^th 860.00 call being the highest volume contract (volume is 30).

Also trading to the upside this morning is Marvell Technology Inc. (MRVL + $11.63 to $207.96) after HSBC upgraded the chip maker to “Buy” from “Hold” and hiked their price target on the stock to $300.00 from $85.00. Analysts at HSBC believe the optical interconnect strength and CXL revenue opportunity “remain undervalued and can drive upside earnings surprises.” Calls are outpacing puts roughly 2:1 with the May 29^th 200.00 call leading the way (volume is 3,716).

New 52-week highs (210 new highs today): Apple Inc. (AAPL + $2.30 to $311.12), Delta Air Lines Inc. (DAL + $3.05 to $79.19), Micron Technology Inc. (MU + $130.14 to $882.14)

Some unusual call activity (~55:1 calls over puts) is being seen in aerospace and defense company Arxis Inc. (ARXS + $4.10 to $38.90) as options traders primarily target the June 18^th 45.00 call. Volume on this contract is 8,550 versus open interest of 63, so it’s likely that nearly all the volume represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.70-1.25 each, which suggests bullish intent. ARXS is scheduled to report Q1 earnings tomorrow (May 27^th) after the bell, so this positioning captures the potential impact of that event.

Shares of AutoZone Inc (AZO - $346.15 to $3,060.15) are under pressure this morning after the auto parts retailer reported fiscal Q3 adjusted earnings of $38.07 per share ($1.85 beat) on Q3 revenue that increased 8.45% YoY to $4.84B (below the $4.86B expected). AZO’s domestic same-store sales increased 4.1% YoY but international same-store sales were only up 1.6%. Calls are outnumbering puts ~4:3 with the June 18^th 3400.00 call being the highest volume contract (volume is 65).

Also trading to the downside this morning is Expand Energy Corp. (EXE - $1.45 to $96.45) after Barclays downgraded the natural gas producer to “Equal Weight” from “Overweight” and cut their price target on the stock to $110.00 from $127.00. Analysts at Barclays cited their reduced outlook on gas and EXE’s lack of near-term catalysts. Puts are outpacing calls nearly 4:1 with the July 17^th 85.00 put leading the way (volume is 3,122).

New 52-week lows (37 new lows today): BJ’s Wholesale Club Holdings Ltd. (BJ - $2.65 to $83.99), Huron Consulting Inc. (HURN - $2.70 to $102.76), MarketAxess Holdings Inc. (MKTX - $4.53 to $132.60)

Some unusual put activity (~20:1 puts over calls) is being seen in building materials maker CRH PLC (CRH - $0.01 to $47.01) which is primarily being driven by a couple of large blocks that simultaneously traded on the June 18^th expiration earlier this morning:

• 100.00 put (open interest is 302): A 1,540 contract block was bought for $3.02 when the bid/ask spread was $2.55 x $3.40.
• 90.00 put (open interest is 509): A 1,540 contract block was sold for $0.72 when the bid/ask spread was $0.55 x $1.20.

We know that these blocks are new positions based on the respective open interest figures, and it appears that a $10.00-wide bear put spread was established for a net debit of $2.30 (x 1,540 contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that CRH will close below the break-even price of $97.70 at expiration.

Schneider National Inc. (SNDR + $0.90 to $34.30): Option volume is running at ~132x the daily average on this provider of multimodal surface transportation and logistics solutions as option traders primarily target the June 18^th 40.00 call. Volume on this contract is 7,165 versus open interest of 9, so it’s likely that nearly all the volume represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.15-0.35 each, which suggests bullish intent.

Amtech Systems Inc. (ASYS + $0.70 to $22.78): Option volume is running at ~91x the daily average on this semiconductor equipment maker as option traders primarily target the June 18^th 30.00 call. Volume on this contract is 3,811 versus open interest of 132, so it’s likely that nearly all the volume represents fresh positioning. The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.55-1.05 each, which suggests bullish intent.

HawkEye 360 Inc. (HAWK + $1.70 to $32.15): Option volume is running at ~37x the daily average on this defense technology and geospatial analytics company which is primarily driven by a 3,310 contract block that was bought on the June 18^th 35.00 call at the ask price of $1.55 (open interest is 50). We know that this block is a new position based on the open interest figure, and we can assume that the intent is bullish in nature since the trade took place at the ask price.

The Cboe Volatility Index (VIX + 0.46 to 17.05) has been on both sides of the unchanged line today (the intraday range is 16.56-17.23), as equity markets are mixed around the midday mark (DJI - 86, SPX + 39, $COMP + 238). VIX option volume is below average today at 249,292 contracts, and calls are outnumbering puts roughly 3:1 so far today.