Today's Options Market Update
Stocks on Standby as Traders Await Fed Decision
U.S. shoppers kept loading their carts last month even as economic indicators sagged. Retail sales rose 0.6% in August, well above the 0.3% analyst consensus, though major indexes have moved modestly into negative territory after being higher earlier in the session.
"Consumer demand has generally held up despite a softer labor market," said Collin Martin, director, fixed income strategy at the Schwab Center for Financial Research. "The Fed will still likely cut rates tomorrow, but a resilient economy and above-target inflation may prevent the Fed from cutting as much as the markets are expecting over the next few quarters."
Early today, the CME FedWatch Tool priced in 96% odds of a 25-basis point rate cut and 4% odds of a 50-basis point rate cut at tomorrow afternoon's meeting. And an appeals court ruled against President Trump's attempt to fire Fed Governor Lisa Cook, meaning she'll participate. On Monday, markets continued their "melt up" momentum amid a positive backdrop for the AI investment cycle and hopes of falling interest rates. Trump's optimism around China trade negotiations also had traders in a bullish mood, and Trump teased a TikTok deal. Against this backdrop, the S&P 500 index closed above 6,600 for the first time and the Nasdaq Composite reached another new all-time high. Trading could be muted today, however, approaching the Fed decision.
Source: Schwab Center for Financial Research
Morning Rush
The 10-year U.S. Treasury yield (TNX) is slightly higher to 4.038%.
The U.S. Dollar Index ($DXY) is lower by 0.53 to 96.77.
WTI Crude Oil (/CL) is higher by 1.47% to $64.23/barrel.
Gold prices have traded in a range of $3,711.80-$3,739.90, last seen trading higher by 0.21% to $3,726.70/oz.
Natural Gas prices have traded in a range of $2.869-3.109 and were last seen trading higher by 0.46% to $3.057.
Bitcoin (BTC) is lower by ~0.12% today to $115,269.30.
Today's Bullish Activity
Shares of Ferguson Enterprises Inc. (FERG + $11.41 to $225.94) are gapping up this morning after the distributor of plumbing and heating products reported Q4 earnings of $3.48 per share ($0.46 beat) on revenue that rose 6.9% year-over-year to $8.5B (above the $8.4B FactSet consensus estimate). Regarding guidance, the company said it expects 2025 revenue growth to be in the mid-single digits with adjusted operating margin expected to come in a range of 9.2-9.6%. Calls are outnumbering puts ~3:2, but the September 19th 200.00 put is the highest volume contract (volume is 1,244).
Also trading to the upside this morning is Webtoon Entertainment Inc. (WBTN + $4.44 to $19.40) following news that the company has entered into a non-binding agreement with Disney for the development of an all-new digital comics platform from Disney’s portfolio, which includes Marvel, Star Wars, 20th Century Studios and more. Disney also said that it has taken a 2% stake in WBTN. Calls are outnumbering puts ~2:1 with the September 19th 22.50 call seeing the most action from traders (volume is 1,372).
New 52-week highs (128 new highs today): Astera Labs Inc. (ALAB + $8.05 to $239.34), Baidu Inc. (BIDU + $6.34 to $121.16), SiTime Corp. (SITM + $4.74 to $283.87)
Notable Call Activity
Some unusual call activity (~16:1 calls over puts) is being seen in BigBear.ai Holdings Inc. (BBAI + $0.70 to $5.80) as all the top 10 highest volume contracts are calls today. Topping the list is the October 3rd 6.50 call as volume is 35,687 versus open interest of 1,108 (so we know that the activity primarily represents fresh positioning). The bulk of the transactions consisted of various-sized blocks that were bought at various times for between $0.25-$0.40 each, which suggests bullish intent.
Today's Bearish Activity
Shares of Dave & Buster’s Entertainment Inc. (PLAY - $3.74 to $20.45) are moving lower this morning after the entertainment and dining venue operator reported Q2 adjusted earnings of $0.32 per share ($0.60 miss) on revenue that rose 0.1% year-over-year to $557.40M (below the $562.78M expected). Shares of PLAY hit a five-month low of $19.08 earlier in today’s trading session. Puts are outnumbering calls ~3:2 with the September 19th 19.00 put being the highest volume contract (volume is 2,613).
Also trading to the downside this morning is Live Nation Entertainment Inc. (LYV - $3.86 to $168.52) after Rothschild & Co. Redburn downgraded the live entertainment company to “Neutral” from “Buy” while bumping their price target on the stock to $170.00 from $144.00. Analysts at Rothschild & Co. Redburn believe the company’s margin expansion will slow down from fiscal 2026, translating into less potential upside to earnings estimates. Calls are outnumbering puts ~2:1 with the January 2026 185.00 call leading the way (volume is 536).
New 52-week lows (52 new lows today): Accenture PLC (ACN - $0.46 to $237.41), Colgate-Palmolive Company (CL - $0.42 to $81.70), Paychex Inc. (PAYX - $1.38 to $130.59)
Notable Put Activity
Some unusual put activity (~37:1 puts over calls) is being seen in Avadel Pharmaceuticals PLC (AVDL + $0.29 to $15.48) which is primarily being driven by activity on the October 17th 12.50 put. Volume on this contract is 5,001 versus open interest of 40, so it’s likely that nearly all the volume represents opening activity. The bulk of the transactions consisted of various-sized blocks that were bought around the same time at the ask price of $0.20 each, which suggests bearish intent.
Volume Signals
Huntington Ingalls Industries Inc. (HII - $0.16 to $272.86): Option volume is running at ~70x the daily average on this military ship builder which is primarily being driven by a couple of large blocks that simultaneously traded on the December 19th expiration earlier this morning:
- 250.00 put (open interest is 21): A 2,000 contract block was bought for $7.90 when the bid/ask spread was $6.00 x $9.10.
- 220.00 put (open interest is 105): A 2,000 contract block was sold for $2.05 when the bid/ask spread was $1.30 x $3.60.
We know that both these blocks are new positions based on the respective open interest figures, and it appears that a $30.00-wide bear put spread was established for a net debit of $5.85 (x 2K contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that HII will close below the break-even price of $244.15 at expiration.
Ambarella Inc. (AMBA - $2.31 to $78.46): Option volume is running at ~19x the daily average on this chip maker which is primarily being driven by a couple of large blocks that simultaneously traded on the October 17th expiration earlier this morning:
- 85.00 call (open interest is 1,089): A 2,000 contract block was bought at the ask price of $1.51.
- 95.00 call (open interest is 7): A 2,000 contract block was sold for $0.01 when the bid/ask spread was $0.00 x $0.45.
We know that both these blocks are new positions based on the respective open interest figures, and it appears that a $10.00-wide bull call spread was established for a net debit of $1.50 (x 2K contracts x 100 multiplier, excluding commissions). The positioning suggests that the block trader believes that AMBA will close above the break-even price of $86.50 at expiration.
Edwards Lifesciences Corp. (EW - $0.75 to $75.30): Option volume is running at ~10x the daily average on this medical device maker which is primarily being driven by a 5,950 contract block that was bought on the January 2026 85.00 call at the ask price of $1.60 (open interest is 1,130). 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.
Gauging Volatility
The Cboe Volatility Index (VIX + 0.49 to 16.18) has been on both sides of the unchanged line today (intraday range is 15.44-16.27), as equity markets are modestly lower around the midday mark (DJI - 115, SPX - 9, COMP - 23). VIX option volume is above average today at 747,604 contracts, which puts the index at the #7 spot on the "Top Volume by Underlying" list. The volume put/call ratio is currently 0.43, but the highest volume contract is the September 17th 15.50 put (volume is 81,351 vs. open interest of 304,644).
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