Subscribers to Schaeffer's Weekend Trader options recommendation service received this AMAT commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.

Applied Materials Inc (NASDAQ:AMAT) stock recently struggled to gain traction following its Feb. 14 earnings report, breaking below a trendline connecting higher lows since late December. While shares attempted a post-earnings rally, they were quickly rejected at the confluence of their 50- and 80-day moving averages. The 80-day trendline was particularly significant over the past year -- acting as support in April 2024, flashing a sell signal in July, and capping rallies in both September and November.
 
Now, with the stock more than 30% below its July all-time high and slipping beneath prior support levels at $175, downside risk appears elevated, making this an ideal time to buy puts.

Wall Street analysts remain overly optimistic, with 26 “buy” ratings compared to eight “hold” recommendations and just one “sell,” leaving plenty of room for potential downgrades.
 
Meanwhile, options traders are showing signs of over-exuberance, with AMAT’s 10-day call/put volume ratio of 2.10 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sitting in the 92nd percentile of its annual range. Similar readings over the past year have preceded weak price action 50% of the time, reinforcing the stock’s vulnerability at current levels.
 
Our recommended put options has a leverage ratio of 8.0 and will double on an 11.3% drop in the underlying equity.

Stocks are higher midday, getting a much-needed lift from this morning's inflation data that came in line with estimates. The Dow Jones Industrial Average (DJI) is up a sharp 221 points following two days of triple-digit losses and eyeing a small weekly gain. The S&P 500 Index (SPX) and Nasdaq Composite Index (IXIC), however, are still headed for their worst weeks since September. 

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

• See Dell Technologies' latest AI update. 
• 2 China-based stocks stumbling amid tariff threats. 
• Plus, options bulls eye AEO; and two stocks swinging opposite ways after earnings.

Call traders are blasting retail stock American Eagle Outfitters Inc (NYSE:AEO), with 32,000 calls exchanged so far -- 49 times the amount typically seen at this point -- in comparison to 639 puts. The weekly 3/7 14-strike call accounts for most of this activity, with new positions being bought to open. These bulls appear to be buying the dip as AEO inches off yesterday's 52-week lows, up 0.7% at $13.18 at last glance. This month alone, the stock has lost 18.3%. Year over year, the equity is down 44.5%. 

Pharmaceutical concern Perrigo Company PLC (NYSE:PRGO) is one of the top stocks on the New York Stock Exchange (NYSE) today, up 18.6% at $28.62 at last glance. The company announced a fourth-quarter earnings beat, as well as plans to simplify its self-care platform. Hitting its highest levels since August, today's pop has PRGO breaking into positive territory year to date and year over year. 

Acadia Healthcare Inc (NASDAQ:ACHC) was last seen down 24.4% at $30.45, trading at four-year lows after disappointing fourth-quarter results and guidance. Furthermore, the stock was hit with a downgrade from Barclays to "equal weight" from "overweight," while BofA Global Researched lowered its price-target cut to $35 from $40.50, and TD Cowen slashed its price objective to $66 from $70. Over the last 12 months, ACHC has lost 63%. 

Shares of Logitech International SA (NASDAQ:LOGI) and Walgreens Boots Alliance Inc (NASDAQ:WBA) are gapping lower today after downgrades. Specifically, BofA Global Research downgraded the former to "underperform" from "neutral" noting recent struggles and tariff threads, while Deutsche Bank downgraded the latter to "sell" from "hold" due to high uncertainty.

LOGI was last seen down 2.9% to trade at $98.24, pivoting lower from a recent attempt to conquer its Feb. 14, three-year high of $105.65. The equity yesterday closed below its 20-day moving average for the first time since January, but already rose 18.8% so far in 2025.

Options traders have been much more bullish than usual, per LOGI's 50-day call/put volume ratio of 31,05 over at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 98% of annual readings.

WBA is down 3.8% to trade at $10.81, looking to extend its 49.7% year-over-year deficit. Though shares also sport a 15.5% year-to-date gain, overhead pressure at the $12 level has been capping rallies since late January.

Options bulls are targeting Walgreens Boots Alliance stock, with 28,000 calls across the tape so far -- double the intraday average volume -- compared to only 5,051 puts. Most popular is the weekly 2/28 11-strike call, which is set to expire after today's closing bell.

Computer hardware giant Dell Technologies Inc (NYSE:DELL) is down 7.9% at $99.27 at last glance, following lackluster fourth-quarter results. The company's earnings came in at a record $8.14 per share, but revenue and current-quarter guidance disappointed. Dell also announced that it sold about $10 billion artificial intelligence (AI)-optimized servers the last fiscal year, and expects to sell $15 billion this year. 

A handful of analysts lowered their price targets after the event, including Susquehanna to $105 from $120, though Barclays raised its own by $1 to $116. Morgan Stanley chimed in with encouraging words as well, saying Dell Technologies' report was 'better than feared across the board.'

The round-number $100 level, which captured DELL's early-February and September pullbacks, appears to be keeping losses in check today. Overhead though, pressure at the 200-day moving average has kept a lid on gains since December. Year to date, the equity is down roughly 13%. 

Over in the options pits, 37,000 calls and 30,000 puts have been exchanged, which is quadruple the amount typically seen at this point. The weekly 2/28 100-strike put is the most popular, followed by the 105-strike put in the same series. 

Trade tensions between the U.S. and China have flared once again, rattling financial markets and sending U.S.-listed Chinese stocks tumbling. President Donald Trump reaffirmed plans to impose an extra 10% tariff on all Chinese imports, set to take effect on March 4. In response, China vowed to retaliate, announcing its own tariffs on U.S. goods and launching investigations into American companies.

Among the stocks were JD.com Inc (NASDAQ:JD), one of China’s largest e-commerce platforms, and Li Auto Inc (NASDAQ:LI), a leading electric vehicle (EV) manufacturer.

At last check, JD.com stock was down 3.3% at $41.14, though the stock remains 18.1% higher year-to-date. The equity’s recent rally stalled near the $170 level, while today's pullback is finding support at its 20-day moving average.

Meanwhile, Li Auto stock was last seen 5% lower at $30.33. Despite the decline, LI is still 28% higher in 2025, hovering near its Feb. 26 nearly 12-month high of $33.12. However, the stock remains down more than 35% year-over-year.

While JD.com stock’s intraday options activity is relatively quiet, Li Auto stock is experiencing heightened trading volume. So far, 1,915 calls and 3,853 puts have changed hands -- double the typical volume for this time of day. The most active contract is the weekly 2/28 30-strike put, indicating traders may be hedging against further downside risk.

Stocks made a comeback from last week's losses on Tuesday, as investors showed renewed optimism over additional stimulus, and kicked off earnings season with positive energy. Assuaging investor concerns about the incredible spread of COVID-19 in the U.S., Dr. Rochelle Walensky, President-elect Joe Biden's pick for head of the CDC, announced that the U.S. will be able to fulfill its goal of vaccinating 100 million people in Biden's first 100 days as President. 

The Dow Jones Industrial Average (DJI - 30,930.52) added 116.3 points yesterday. The S&P 500 Index (SPX - 3,798.91) added 30.7 points and the Nasdaq Composite (IXIC - 13,197.18) added 198.7 points, or 1.5% on Tuesday. The Cboe Volatility Index (VIX - 23.24) dropped 4.5% for the day yesterday. 

Today investors will likely be equal parts anxious and excited for President-elect Joe Biden's inauguration into the White House. In addition, the National Association of Home Builders (NAHB) index data will be reported today.

Bank of America Corporation (NYSE:BAC) provides banking and financial products and services. Earnings per share decreased 20.27% over the past year to $0.59, which beat the estimate of $0.55. Revenue of $20,212,000,000 decreased by 10.14% from the same period last year, which missed the estimate of $20,680,000,000.

The Goldman Sachs Group, Inc. (NYSE:GS) operates as an investment banking, securities, and investment management company. Earnings per share were up 157.57% over the past year to $12.08, which beat the estimate of $7.47. Revenue of $11,741,000,000 rose by 17.94% year over year, which beat the estimate of $9,990,000,000.

Halliburton Company (NYSE:HAL) provides a range of services and products to oil and natural gas companies. Earnings per share decreased 43.75% year over year to $0.18, which beat the estimate of $0.15. Revenue of $3,237,000,000 declined by 37.64% from the same period last year, which beat the estimate of $3,210,000,000.

State Street Corporation (NYSE:STT) provides a range of financial products and services to institutional investors. Earnings per share decreased 14.65% year over year to $1.69, which beat the estimate of $1.56. Revenue of $2,917,000,000 decreased by 4.30% year over year, which beat the estimate of $2,820,000,000.

Fulton Financial Corporation (NASDAQ:FULT) operates as a multi-bank financial holding company. Earnings per share decreased 9.09% over the past year to $0.30, which missed the estimate of $0.31. Revenue of $164,578,000 higher by 1.29% year over year, which beat the estimate of $158,310,000.

Interactive Brokers Group, Inc. (NASDAQ:IBKR) operates as an automated electronic broker worldwide. Earnings per share increased 18.97% year over year to $0.69, which beat the estimate of $0.59. Revenue of $599,000,000 rose by 19.80% from the same period last year, which beat the estimate of $558,850,000.

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) provides surface transportation and delivery services. Earnings per share increased 6.67% year over year to $1.44, which beat the estimate of $1.30. Revenue of $2,738,000,000 up by 11.76% from the same period last year, which beat the estimate of $2,570,000,000.

Pinnacle Financial Partners, Inc. (NASDAQ:PNFP) operates as the bank holding company for Pinnacle Bank. Earnings per share rose 24.41% over the past year to $1.58, which beat the estimate of $1.35. Revenue of $304,429,000 higher by 20.06% year over year, which beat the estimate of $303,800,000.

United Community Banks, Inc. (NASDAQ:UCBI) operates as the bank holding company for United Community Bank. Earnings per share rose 11.48% year over year to $0.68, which beat the estimate of $0.60. Revenue of $183,863,000 rose by 28.29% from the same period last year, which beat the estimate of $180,260,000.

Looking ahead to tomorrow, investors will likely be equal parts anxious and excited for President-elect Joe Biden's inauguration into the White House on Wednesday. In addition, the National Association of Home Builders (NAHB) index data will be reported tomorrow.

As you may well be aware, it's very common for option players to close out their trades without ever touching the underlying equity. In other words, they're not looking to acquire or sell the underlying stock; these speculators simply want to capitalize on changes in the option's price (known as "trading for premium"). Obviously, then, every derivatives trader worth his or her salt must be well-versed in the factors that influence an option's price.

Equally as obvious: One of the main factors that affects an option's price is the price of the equity on which it is based. (Assuming all other things are equal, a call option's value will increase in direct relation with the underlying, while a put option's value will increase in inverse relation with the underlying.) But how much do you know about the other catalysts that can prompt major changes in the price of a call or put contract? And do you know which Greek measures your option's probability of finishing in the money? Read on to learn more.

Implied volatility can make or break your trade

The first and most nebulous factor is known as implied volatility (IV). In the simplest terms, IV is a measure of the market's expectations for the underlying equity's performance during the life span of the option. When IV is high, options will be more expensive to purchase. Conversely, low IV will translate to more affordable option prices.

Generally speaking, heightened IV correlates with bearish sentiment, while low IV suggests a bullish mood. Additionally, an option's IV will rise ahead of scheduled events, such as earnings reports and new product launches. These occurrences can often spark major movements in the price of the underlying, and the expectation of such a move results in higher IV. Once the anticipated event occurs, IV will immediately drop.

What does this mean for option players? Well, that depends on whether you're buying or selling. If you purchase an option with high IV, you need a much bigger move out of the underlying stock to profit from the trade. That's because you're paying a higher premium to buy the option in the first place.

For this reason, be wary of buying calls or puts directly prior to an earnings report or other scheduled event. When IV is over-inflated, your option could potentially drop in value, even if the stock moves in the direction you anticipated.

On the other hand, hefty IV readings can be a boon for the option writer. If you sell a call option with very high IV, that translates to a higher premium payment in your pocket. Then, when IV drops back to its usual levels, you can buy to close your option at a discount.

So, how do you judge whether IV is high or low? By comparing the option's current IV against the stock's historical volatility (HV), you can determine whether the contracts are relatively cheap or comparatively pricey. Just make sure that you match up the option's life span with the proper time frame -- for example, if you're trying to gauge IV on an option with two months of shelf life, compare that number against the equity's 40-day HV. If the IV is higher than the HV, the options are more expensive than usual. If the historical figure is higher, the options are trading at a bargain.

Time decay speeds up as expiration approaches

Another factor that affects the price of your option is time decay, which refers to the loss of time value. While "time value" is commonly understood to refer to the amount of time priced into your option contract -- and longer-dated options do, indeed, carry higher premiums than their shorter-term counterparts -- it's important to note that IV is also bundled under the umbrella of time value.

In-the-money options carry both intrinsic value and time value, while out-of-the-money options consist solely of time value. As a result, the effects of time decay are felt most acutely on out-of-the-money options.

What makes time decay so tricky is that it occurs in a non-linear fashion, and actually accelerates as the option draws closer to its expiration date. The rate at which your option will lose time value can be measured by theta, which is one of the infamous "Greeks."

Since it erodes the value of an option, time decay works against the option buyer. For every day that passes, your out-of-the-money option will lose a steadily increasing amount of time value, thereby decreasing the contract's worth.

On the other side of this equation, time decay works in favor of the option seller. Should you need to buy to close your sold option, the erosion of time value should translate to a lower buy-to-close price (all other things being equal).

Delta offers up some key information

To clear up a common misconception, delta does not affect an option's price. Instead, delta is yet another one of those metrics known collectively as the Greeks. Its function is to measure how much your option's price will change for every one-point gain in the underlying stock. Call option deltas will always be a positive number between 0 and 1, while put option deltas will always be a negative number between 0 and -1, since a put option will lose value as the underlying stock rises.

For example, if your option has a delta of 0.70, it means that your call option will gain 70 cents for each dollar the stock rises. As in-the-money calls get close to expiration, they will approach a delta of 1. As an in-the-money put approaches expiration, its delta will move closer to -1. This indicates that the options are now moving point-for-point with the underlying security.

For this reason, an option's delta is thought to roughly correspond with the contract's chances of finishing in the money -- so, that call option with a delta of 0.70 would be said to have a 70% chance of expiring in the money. (Keep in mind that this is an estimation, not a guarantee.)

You'll also sometimes hear delta referred to as the "hedge ratio," because some traders utilize an option's delta to determine how they should hedge their investments. For example, let's say that you purchase one call option controlling 100 shares of XYZ with a delta of 0.50. Assuming that this option has a 50% chance of finishing in the money, you decide to hedge your long position by shorting the underlying stock. Using the delta as a hedge ratio, you would want to sell short 50 shares of XYZ, or 50% of your total exposure.