Stocks are rising sharply, adding to yesterday’s rally, amid a smaller-than-expected rate hike from the Reserve Bank of Australia (RBA). On the equity front, South Korean internet giant Naver Corporation announced that it will acquire Poshmark for $1.2 billion. Electric vehicle company Rivian posted a noticeable jump in its Q3 production, and confirmed that it is on track to achieve its production goals for FY22. In economic news, factory orders remained unchanged, the final reads on durable goods orders matched expectations, data on capital spending was upwardly adjusted, and the Job Opening and Labor Turnover Survey fell more than forecasted. Treasury yields are declining, and the U.S. dollar is falling. Crude oil prices are rising ahead of this week's OPEC meeting, with reports suggesting production cuts may be in the offing, and gold is trading higher. Asian stocks finished broadly higher following the Reserve Bank of Australia’s dovish monetary policy decision, while markets in mainland China and Hong Kong were closed for holidays. European stocks are rising noticeably amid the RBA’s rate increase, and following yesterday’s announcement from the U.K. government that it will reverse its decision to cut taxes.
At 10:53 a.m. ET, the Dow Jones Industrial Average is up 2.2%, the S&P 500 is climbing 2.7%, and the Nasdaq Composite is soaring 3.3%. WTI crude oil is jumping $2.89 to $86.52 per barrel, and Brent crude oil is rallying $2.12 at $90.98 per barrel. The gold spot price is increasing $25.00 to $1,727.00 per ounce, and the Dollar Index is falling 1.0% to 110.72. Natural Gas prices have traded in a range of $6.31-6.725 and were last seen trading higher by $0.241 (or +3.72%) to $6.711/MMBtu.
Source: Schwab Center for Financial Research
Today’s Bullish Activity
Moving higher this morning is Domino’s Pizza Inc. (DPZ + $12.38 to $328.82) after UBS upgraded the pizza delivery chain to “Buy” from “Neutral” and raised their price target on the stock to $430.00 from $385.00, citing an attractive risk/reward profile. Commenting on the move, UBS analyst Dennis Geiger stated, “We see near-term catalysts to accelerate DPZ sales from: expected upcoming price increases on select promos, efforts to improve driver staffing shortages, and potential 3P delivery partnerships. Additionally, we believe DPZ should exhibit above avg resiliency in a pressured spending environment given leading value positioning and a very affordable dinner option for families”. Calls are slightly outnumbering puts with the October 7th 340.00 call being the highest volume contract (volume is 554).
Also trading to the upside is Illumina Inc. (ILMN + $13.90 to $201.14) after SVB Securities upgraded the provider of DNA sequencing and array-based solutions to “Outperform” from “Market Perform” and raised their price target on the stock to $270.00 from $220.00. SVB Securities analyst Puneet Souda said that he expects the company’s newly launched sequencing equipment NovaSeq X+ will become the “ultimate genome machine” and the instrument of choice in clinical and research settings. Calls are outnumbering puts ~3:2 with the October 21st 190.00 call leading the way (volume is 202).
New 52-week highs (22 new highs today): Akero Therapeutics Inc. (AKRO + $2.95 to $36.39), First Solar Inc. (FSLR + $6.58 to $143.20), Texas Pacific Land Corp. (TPL + $53.99 to $1,919.99)
Notable Call Activity
Some unusual call activity (~100:1 over puts) is being seen in American Axle & Manufacturing Holdings Inc. (AXL + $0.67 to $7.75) as option traders primarily target the October 21st 8.00 call. Volume on this contract is 8,281 versus open interest of 340, so we know that the volume primarily represents new positioning. The bulk of the transactions on this contract consisted of various mid-sized blocks that were being bought around the same at the ask price of $0.30 each, which suggests bullish intent. Note: AXL is scheduled to report Q3 earnings on November 4th before the bell, so this positioning does not capture the potential impact of that event.
Today’s Bearish Activity
Leading the percentage decliners list this morning is KalVista Pharmaceuticals Inc. (KALV - $7.69 to $6.55) after the drug developer said that it has ended a mid-stage trial of its experimental oral therapy (KVD824) to prevent recurrent swelling in patients with hereditary angioedema. Calls are outnumbering puts ~10:1 with the highest volume contract being the December 16th 7.50 call (volume is 739).
Also trading to the downside is AXT Inc. (AXTI - $1.31 to $5.70) after the manufacturer of compound semiconductor wafer substrates lowered its Q3 revenue guidance to a range of $34-35M from its prior forecast $39-41M, citing weak macroeconomic conditions. Shares of AXTI are trading at a three-month low this morning. Option volume is relatively light with the October 21st 5.00 put being the highest volume contract (volume is 20).
New 52-week lows (21 new lows today): Faze Holdings Inc. (FAZE - $2.69 to $5.46), Membership Collective Group Inc. (MCG - $0.17 to $4.21), Motus GI Holdings Inc. (MOTS - $0.13 to $2.18)
Notable Put Activity
Some unusual put activity (better than 200:1 over calls) is being seen in pet insurer Trupanion Inc. (TRUP + $1.20 to $60.44) as option traders primarily target the November 18th 40.00 put. Volume on this contract is 5,151 (vs open interest of 2,003), which nearly entirely consisted of three large block trades that took place at three separate times – a 3,000 contract block was bought for $1.05 when the bid/ask spread was $0.85 x $1.10, a 1,000 contract block was bought at the ask price of $1.00 and a 1,000 contract block was bought for $0.95 when the bid/ask spread was $0.75 x $1.00. Assuming all of these blocks are new positions, we can assume the intent is bearish in nature given where the trades took place within their respective bid/ask spreads. Note: TRUP is scheduled to report Q3 earnings on November 2nd after the bell, so this positioning captures the potential impact of that event.
Volume Signals
Cvent Holding Corp. (CVT + $0.53 to $5.93): Option volume is running at over 200x the daily average on this provider of meetings, events and hospitality technology as option traders primarily target the February 2023 12.50 call. Volume on this contract is 10,367 versus open interest of 0, so we know that all of the volume represents fresh positioning (assuming no day trades). The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times at the ask price of $0.40 each, which suggests bullish intent.
Immunovant (IMVT + $1.87 to $8.46): Option volume is running at over 10x the daily average on this clinical-stage biopharmaceutical company which is primarily being driven by activity on the October 21st 10.00 call. Volume on this contract is 1,686 versus open interest of 533, so we know that the volume primarily represents new positioning. The bulk of the transactions on this contract consisted of various-sized blocks that were being bought at various times at the ask price of $0.30 each, which suggests bullish intent. Note: Shares of IMVT are trading ~27% high this morning after the company announced a 12.5M share secondary offering which was priced at $6.00/share.
Velo3D Inc. (VLD + $0.47 to $4.54): Option volume is running at over 4x the daily average on this metal additive manufacturing technology company which is primarily being driven by a 4,000 contract block that was bought on the May 2023 5.00 call at the ask price of $1.25 (open interest is 4,091). It’s likely that this block represents a new (bullish) position given the expiration date, but we can’t be sure given the open interest figure.
Gauging Volatility
The Cboe Volatility Index (VIX - 0.96 to 29.14) has been in negative territory all day today (the intraday range is 28.56-29.54) as equity markets are firmly higher across the board around the mid-day mark (DJI + 757, SPX + 105, COMPX + 356). VIX option volume has been above average today at 305,754 contracts, which puts the index at the #9 spot on the “Top Volume by Underlying” list. The volume put/call ratio is currently 0.70, with the highest volume contract being the November 16th 35.00 call (volume is 35,083 vs. open interest of 131,735).
© Charles Schwab
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