OPTIONS VOLUME SOARS AS ALEXION PHARMACEUTICALS SINKS

The drugmaker announced a pair of top executives will be leaving

Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is trading down 9% at $104.97 -- fresh off a three-year low at $102.47 -- amid a busy session for the stock. Roughly 1.5 million ALXN shares have changed hands, the most in two years, after the drugmaker said its chief financial officer and the head of research and development are both leaving. A downgrade to "neutral" from "overweight" at J.P. Morgan Securities is adding more pressure, with the brokerage saying the executive shake-up "will not help waning confidence in ALXN shares." With the stock short-sale restricted, ALXN options traders are busy.

At last check, 21,379 calls and 19,138 puts have traded on ALXN, more than 20 times what's typically seen at this point in the day. Total options volume is on track to settle in the 99th annual percentile, but remains below the 52-week peak of 61,806 Alexion options traded in a single session, set on Jan. 5. Most active are the November 100 and 110 puts and 120 call, which appear to be involved in a three-way spread.

Shorter-term options traders look to be taking a more clear-cut bearish approach, purchasing new positions at ALXN's weekly 5/26 102-strike put. If this is indeed the case, the goal is for Alexion shares to be sitting south of $102 -- territory not charted since October 2013 -- by week's end, when the options expire.

his would echo the broader trend seen in ALXN's options pits, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 3.40 ranks 2 percentage points from a 52-week peak. In other words, options traders have bought to open puts relative to calls at a near-annual-high clip. 

The skepticism is seen outside of the options pits, as well, with short interest up 29% since mid-March. It seems this selling pressure has weighed on ALXN's stock price, too, with the shares down almost 23% from their March 6 high at $135.86. However, not a single one of the 18 analysts covering Alexion Pharmaceuticals maintain a "sell" rating. The stock could be due for bigger headwinds, should more bearish brokerage notes come down the pike.

DOW JONES INDUSTRIAL AVERAGE HOLDS GAINS AFTER TRUMP BUDGET

The DJIA is on track for a fourth straight win, though today's upside is modest

The Dow Jones Industrial Average (DJIA) has spent the first half of the trading session in positive territory, and is on track to extend its daily winning streak to four. Nevertheless, gains have been kept in check as traders consider last night's deadly terrorist attack at an Ariana Grande concert in Manchester and a mixed bag of economic data here at home, including a bigger-than-expected drop in new home sales. Traders are also mulling over President Donald Trump's fiscal 2018 budget proposal, which includes $3.6 trillion in spending cuts over the next 10 years, while looking ahead to an afternoon speech from Minneapolis Fed President Neel Kashkari.

Continue reading for more on today's market -- and don't miss:

SPY put options price in another shocker, says Bernie Schaeffer.
How options traders doubled their money on Alibaba stock.
Plus, Momo options volume explodes; AutoZone stock slumps to new low; and Seadrill's big bounce.

Among the stocks with unusual options activity is Momo Inc (ADR) (NASDAQ:MOMO), with nearly 41,000 contracts traded -- representing eight times the expected intraday pace, with volume running in the 100th annual percentile. MOMO stock is trading down 2% at $41.96 post-earnings, retreating from yesterday's record high of $45.95, and most of the option activity appears to be the result of traders liquidating weekly 5/26 call positions ahead of Friday's expiration.

AutoZone, Inc. (NYSE:AZO) is one of the biggest decliners on the New York Stock Exchange (NYSE), after the auto parts retailer's disappointing earnings report was met with a downgrade at Raymond James. AZO stock is down 8.9% at $601.09 -- fresh off a two-year low of $597.45 -- and on track for its worst day in eight years.

Rig operator Seadrill Ltd (NYSE:SDRL) is one of the leading percentage gainers on the NYSE, up 9.4% to trade at $0.57. Today's pop may be more of a dead-cat bounce for SDRL stock, though, considering it's down 83% year-to-date, and hit a record low of $0.51 yesterday. Seadrill is expected to report first-quarter earnings tomorrow.

MOMO, NOKIA, AUTOZONE NEWS TODAY

MOMO stock has been on fire this year, but is trading lower today

The Dow is on pace for a fourth straight day of gains. Among specific stocks on the move are China-based social media concern Momo Inc (ADR) (NASDAQ:MOMO), smartphone specialist Nokia Oyj (ADR) (NYSE:NOK), and car parts retailer AutoZone, Inc. (NYSE:AZO). Here's a quick look at what's moving shares of MOMO, NOK, and AZO.

MOMO Stock Swings Lower After Earnings

Momo stock is down 7.1% at $39.81, despite a blowout first-quarter earnings report. Nevertheless, the shares are still up 116% year-to-date and hit a record high of $45.95 yesterday. Short-term options traders have shown an unusual preference for calls over puts, per MOMO's Schaeffer's put/call open interest ratio (SOIR) of 0.43, which ranks in the low 16th annual percentile.

Apple Agreement Sends NOK Stock Higher

Nokia stock is up 6.3% this morning at $6.60, earlier tagging an annual high of $6.65, thanks to news the company has settled its patent dispute with Apple, with the companies signing a new collaboration agreement. NOK shares have been rallying hard since bouncing from their 200-day moving average late last month, but analysts remain bearish. Specifically, 70% of covering brokerage firms rate Nokia a "hold."

AZO Stock Crushed by Disappointing Earnings

AutoZone's fiscal third-quarter earnings missed analysts' expectations, with the company citing delayed tax refunds for the disappointing numbers, and the shares have so far shed 7.7% to trade at $608.83. In fact, AZO stock earlier hit a two-year low of $597.45, and Raymond James has weighed in with a downgrade to "market perform" from "strong buy." More bearish notes from analysts are certainly a possibility, since 10 of 17 brokerage firms recommend buying AutoZone stock, with zero "sell" ratings on the books.

U.S. STEEL, XILINX, HELMERICH & PAYNE DOWNGRADED

Analysts are weighing in on steel maker United States Steel Corporation (NYSE:X), semiconductor stock Xilinx, Inc. (NASDAQ:XLNX), and energy name Helmerich & Payne, Inc. (NYSE:HP). Here's a quick roundup of today's bearish brokerage notes on shares of X, XLNX, and HP.

X Stock Price Target Cut at BofA-Merrill Lynch

Since topping out at a two-year peak of $41.83 in late February, X stock has shed more than half its value to trade at $19.32. In response, BofA-Merrill Lynch cut its price target on U.S. Steel to $23 from $26. While the majority of analysts have taken the skeptical route with "hold" or worse ratings, X options traders have been buying to open calls relative to puts at a near-annual-high clip of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), U.S. Steel's 10-day call/put volume ratio of 2.31 ranks 6 percentage points from a 52-week peak.

Wells Fargo Downgrades XLNX Stock After Analyst Day

XLNX stock hit a 16-year high of $67.75 ahead of the company's annual analyst day. Today, the shares are trading down 5.7% at $63.62, after Wells Fargo downgraded the equity to "market perform" from "outperform," citing a "lackluster growth dynamic in [the] PLD market." Should Xilinx stock shake off today's dip and resume its longer-term uptrend, there's plenty of skepticism to be unwound. More than three-quarters of covering analysts maintain a "hold" or worse rating, and it would take short sellers nearly four sessions to cover their bearish bets. This could create tailwinds for the shares in the near term.

HP Stock Trades Down On Negative Goldman Sachs Outlook

Goldman Sachs downgraded HP stock to "sell" from "neutral" and slashed its price target to $45 from $63 -- territory not charted since early 2016. The shares have tumbled 5.4% to trade at $56.64, bringing its year-to-date deficit to 25%. Meanwhile, there's plenty of pessimism directed toward the energy stock. Short interest accounts for more than 17% of Helmerich & Payne stock's available float, while 74% of analysts maintain a "hold" or "strong sell" rating.

CARVANA, WINGSTOP, ATWOOD OCEANICS UPGRADED

Analysts are weighing in on used car website Carvana Co (NYSE:CVNA), restaurant chain Wingstop Inc (NASDAQ:WING), and energy stock Atwood Oceanics, Inc. (NYSE:ATW). Here's a quick roundup of today's bullish brokerage notes on shares of CVNA, BWLD, and ATW.

Analysts Issue "Buy" Ratings for CVNA Stock

On Monday, Carvana shares received their first "buy" rating since going public on April 28, courtesy of Craig-Hallum. More analysts have followed suit today, with Baird, BofA-Merrill Lynch, BMO, Citigroup, and Wells Fargo also initiating coverage with the equivalent of a "buy" rating. While CVNA stock is trading up 4.4% at $11.56 this morning, it remains below its record peak of $13.94, hit on its first day of trading.

Goldman Sachs Adds WING Stock to "Conviction Buy" List

WING stock has recently found a foothold atop its 30-day moving average, home to its year-to-date breakeven mark. Following a successful test of this trendline yesterday, Wingstop shares are trading up 3% at $30.55, after Goldman Sachs added the equity to its "Conviction Buy" list, calling it "one of the few unchallenged unit growth stories." Almost all of the brokerages covering WING stock tend to agree, with nine out of 11 issuing a "buy" or better rating, and not a single "sell" in the books.

ATW Stock Upgraded On M&A Potential

Goldman Sachs raised its rating on ATW stock to "neutral" from "sell" and its price target to $8.25 from $7.50, saying the company has better visibility and is an "attractive M&A target." While Atwood Oceanics shares have added 3% to trade at $8.99, they still remain more than 30% lower year-to-date. Short sellers have helped drive this bearish price action, too. Short interest accounts for nearly 29% of ATW's available float, or 8.3 times the stock's average pace of trading.

SPY PUT OPTIONS PRICE IN ANOTHER SHOCKER

Last Wednesday's stock sell-off triggered a Brexit-style spike in put option skews on the broad-based equity ETF

Options volume exploded last Wednesday as stocks sold off in response to the ever-spiraling series of crises from Capitol Hill, with the Options Clearing Corporation (OCC) recording the highest single-day volume since Nov. 10 -- and the most active day for put options, in particular, since June 24. Not surprisingly, the broad-based SPDR S&P 500 ETF Trust (SPY) attracted quite a bit of attention; Trade-Alert data shows SPY generating more than 80% of the day's ETF option volume. That includes some 3.59 million SPY puts, which marked the fund's highest put volume day since the post-election peak of 3.91 million back on Nov. 9.

Simultaneous with this spike in SPY put volume was a jump in the exchange-traded fund's 30-day at-the-money implied volatility (IV) skew, which reflects the difference in IV levels between put options and their call counterparts. In percentage-point terms, SPY's IV skew popped to 6.00 on Wednesday, and kept climbing to 6.10 by Thursday -- this metric's highest point since the Nov. 8 pre-election peak of 7.63.

Notably, in the midst of this SPY put volume frenzy, 30-day IV on the fund rose only as high as 12.29% as of Wednesday, in territory explored as recently as mid-April. Likewise, the CBOE Volatility Index (VIX) briefly set a marginal new year-to-date high on Thursday, but eventually cooled to end the session lower (and settled the week not too far above its calendar-year midpoint). So while short-term puts on SPY are now considerably more expensive than their corresponding call strikes, it would seem that short-term volatility expectations are still well within what's recently been the norm.

From a purely practical standpoint, this bottom-lines to a less-than-ideal time for investors to hedge long stock positions via the purchase of short-term, at-the-money SPY put options, which have rarely carried a steeper IV premium in the last year relative to their call counterparts -- and as such, it's an effective reminder that the best opportunity to acquire portfolio hedges is before you need them.

And from a sentiment analysis standpoint, it's interesting that SPY put volume last week attained heights previously reached on just two other occasions in the past year -- both of which coincided with election results (first in the U.K., and then here in the U.S.) that were generally considered to be the unlikeliest possible outcome. And to add another layer to this analysis, the number of bulls in the latest American Association of Individual Investors (AAII) survey tumbled, as of the week ended May 17, to the lowest level since the U.S. election, as the so-called "despondency ratio" of neutral and bearish respondents hit its loftiest point since Nov. 2.

With the appointment of a special counsel creating a considerable overhang of uncertainty in Washington, D.C., and cable news pundits floating "the 'i-word'" in their nightly broadcasts, it may be of some comfort to investors to consider the degree to which a "Brexit"-level -- or "Trump victory"-level -- shocker appears to have been already priced into the SPY options market.

DOW JONES INDUSTRIAL AVERAGE FUTURES SIGNAL FOURTH STRAIGHT DAY OF GAINS

Dow Jones Industrial Average (DJIA) futures are trading above fair value this morning, as investors consider the latest corporate earnings and speeches from regional Fed presidents. Specifically, Minneapolis Fed President Neel Kashkari, Philadelphia Fed President Patrick Harker, and Chicago Fed President Charles Evans will all speak throughout the day. Oil prices should also remain in focus, as Thursday's meeting of top oil producers approaches. At last check, July-dated crude futures were down 0.1% at $51.10 per barrel.

Stock traders are also keeping tabs on last night's deadly explosions in Manchester, which prompted U.K. officials to raise the terrorist threat level to "severe." Regardless, the Dow and its index peers look set to extend their win streaks to four.

Continue reading for more on today's market, including:

Why Trump headlines can't take all the blame for last week's VIX spike.
How Raytheon options traders reacted to a multi-billion arms deal.
Goldman weighed in on a preferred cloud stock pick.
Plus, Toll Brothers earnings top estimates; Momo stock is on pace for new highs; and analysts clash over Xilinx.

5 Things You Need to Know Today
  

1. The Chicago Board Options Exchange (CBOE) saw 923,272 call contracts traded on Monday, compared to 496,667 put contracts. The resultant single-session equity put/call ratio moved down to 0.54, while the 21-day moving average edged down to 0.63.
2. Toll Brothers Inc (NYSE:TOL) is up more than 3% in pre-market trading, thanks to a strong fiscal second-quarter earnings report. TOL stock was already trading at annual highs, and this move would mark its sixth straight quarter of post-earnings gains. 
3. Chinese social media stock Momo Inc (ADR) (NASDAQ:MOMO) has been surging up the charts this year, and that rally is set to continue, with a better-than-expected first-quarter earnings report set to put the U.S.-listed shares in record-high territory. MOMO stock was already up 133% year-to-date, and yesterday hit an all-time high of $45.95. 
4. Programmable chip stock Xilinx, Inc. (NASDAQ:XLNX) has been another hot property, touching a 16-year high of $67.75 yesterday. However, XLNX shares are down 3% in electronic trading, due to a downgrade to "market perform" from "outperform" at Wells Fargo. Elsewhere, SunTrust Robinson and BMO weighed in with price-target increases to $68 and $71, respectively. XLNX is set to open near $65, which marked its post-bull gap highs from late April through mid-May. 
5. Cracker Barrel (CBRL), Diana Shipping (DSX), and Intuit (INTU) are some other names on today's earnings calendar. New home sales data will be released, too. 

Overseas Trading

It was a mixed finish in Asia, as traders digested news of a deadly bombing in northern England and oil prices retreated. In Japan, the Nikkei slid 0.3% as the yen rose on its safe-haven status. China's Shanghai Composite also closed lower, shedding 0.5%. On the flip side, South Korea's Kospi tacked on 0.3%, while Hong Kong's Hang Seng edged up 0.05%.

European stocks are trading higher at midday, brushing off the terrorist attack at an Ariana Grande concert in Manchester, which the Islamic State has since claimed responsibility for. While London's FTSE 100 is up 0.13%, the German DAX has added 0.6% after Ifo's business confidence index hit a record high this month, and factory activity grew at its fastest pace since April 2011. The French CAC 40 is also in positive territory after upbeat economic data, trading 0.8% higher after IHS Markit's preliminary purchasing managers index (PMI) notched a six-year peak.

Article by MagnusYard.