Rivian Automotive Inc (NASDAQ:RIVN) stock is down 5.1% to trade at $12.90 at last glance, as investors brush off the company's better-than-expected fourth-quarter earnings and its first "positive gross profit." The decline comes after Rivian forecasted slower deliveries this year, with the electric vehicle (EV) name expecting 46,000 to 51,000 EV deliveries this year, compared to 51,579 deliveries last year. 

Following the earnings report, Cantor downgraded RIVN to "neutral" from "overweight." No fewer than four other brokerages chimed in with price-target hikes, however, including Needham to $17 from $14. 

Options traders are reacting to the news, with 141,000 calls and 58,000 puts traded -- quadruple the volume typically seen at this point. The February 13 call is the most popular, where new positions are being opened. 

On the charts, Rivian Automotive stock is headed for its third-straight daily loss, though the $12 level lingers below as familiar support. Year over year, the equity is up 11.4%. 

Celsius Holdings Inc (NASDAQ:CELH) is on track for its largest percentage gain since November 2020, last seen up 26.9% at $32.40. The energy drink company reported adjusted fourth-quarter earnings of $0.14 per share on $332 million in revenue, topping analyst expectations.

Investor enthusiasm was further fueled by Celsius’ announcement of a $1.8 billion cash-and-stock acquisition of rival Alani Nutrition, a move that strengthens its position in the energy drink market.

Options traders are piling on, with more than 118,000 calls and 28,000 puts traded so far -- 11 times the intraday average. The most popular contracts are the March 40 and June 40 calls, respectively, signaling bullish sentiment extending into mid-year.

Today’s rally marks a strong turnaround for CELH, which was down 3.1% year-to-date before this surge. Celsius stock is trading at its highest level since mid-October and has cleared its 100-day moving average, a key technical level that had acted as resistance since June 2024 and stifled multiple rally attempts since December.

A short squeeze could be fueling today's melt up. Short interest jumped 24.4% over the last month, with the 37.19 million shares sold short accounting for nearly 25% of the stock’s available float. At current trading volumes, it would take nearly five days for short sellers to cover.

Options traders are in luck as Celsius stock's Schaeffer's Volatility Scorecard (SVS) ranks at 99 out of a possible 100. This suggests CELH tended to exceed options traders' volatility expectations over the past 12 months.

At last glance, C3.ai Inc (NYSE:AI) stock is down 6.3% to trade at $28.87 ahead of the company’s fiscal third-quarter earnings report, set for release after the market close Wednesday, Feb. 26. The equity has struggled over the past three months, shedding 17.5%, and is now down 16.1% year-to-date. However, AI is trading near a historically bullish trendline that could support a rebound in the coming month.

C3.ai stock is currently testing its 126-day moving average, a trendline that has historically sparked bullish returns. According to Schaeffer’s Senior Quantitative Analyst Rocky White, AI has come within striking distance of this moving average after spending a prolonged period above it—defined as 80% of the past two months and eight of the last 10 trading days—four times in the past three years.

Following half of these previous signals, AI was higher one month later, averaging an 8.6% gain. A similar move from its current level would put the stock just above $31.

AI has delivered mixed post-earnings performances, though it notably gained 24.5% and 19.4% after earnings last February and May, respectively. Over the past two years, the stock has averaged a post-earnings move of 15.3%, regardless of direction. This time around, options traders are pricing in a slightly higher-than-expected swing of 18.1%.

Meanwhile, sentiment in the options pits suggests the potential for a shift. AI’s 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits in the 86th percentile of annual readings, indicating elevated levels of pessimism. If traders unwind these bearish bets, it could provide tailwinds for the stock. 

Analyst coverage remains cautious, with 10 of 14 brokerages rating AI a "hold" or worse. If the stock bounces off its technical support level and posts a strong earnings reaction, it could prompt some analysts to reassess their stance, potentially fueling additional upside.

Software stock MicroStrategy Inc (NASDAQ:MSTR) has spent recent weeks consolidating around the $320 region, holding its +10% year-to-date level since the start of the year. The company has been in the spotlight as it buys up more Bitcoin (BTC), even recently cutting 20% of its workforce in order to do so.

MSTR has been popular amongst options traders. In fact, the stock made its way onto Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks with the highest options volume over the past 10 days. During this period, 3,486,312 puts and 2,150,898 puts were exchanged, with the most activity at the weekly 2/14 340-strike call. In fact, nine out of 10 of the top contracts over the past two weeks were calls. 

This bullish-leaning sentiment aligns with MSTR's 50-day call/put volume ratio of 3.01 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio ranks in the 99th percentile of its annual range, showing a strong preference for calls over the last 10 weeks. 

There remains massive short squeeze potential around the stock. Short interest tapered off in the most recent reporting period, yet the 24.01 million shares sold short account for 10% of MSTR's total available float. 

These options are reasonably priced at the moment, too. The equity's Schaeffer's Volatility Index (SVI) of 74% ranks in the 7th percentile of its annual range, meaning options traders are pricing in low volatility expectations. 

When selecting the right option to buy, a trader has several choices to make. One is whether to purchase an in-the-money (ITM) or out-of-the-money (OTM) option. While the goal for "vanilla" buyers is to have the option be in the money at expiration, the selected option depends on the amount the trader wants to spend and their risk tolerance, as well as their specific expectations for the underlying stock. 

Understanding In the Money vs. Out of the Money

Before delving into the pros and cons of each, let's look at what it means to be in or out of the money. A call is ITM when the underlying stock is trading above the strike price. Conversely it is OTM when the underlying stock is trading below the strike price. Let's say a trader purchases a February 50 call on Stock XYZ. If the underlying shares are trading at $60, that call is ITM. If the stock is trading at $40, that call is OTM.

The same holds true for put options, but in reverse. So, if shares of XYZ are trading at $40, the February 50 put will be ITM. Conversely, a February 30 put would be OTM, if XYZ is trading at $40. 

Why Buy ITM Options?

Like all trades, in-the-money options have risks and rewards. These options are generally viewed as the more "conservative" choice, as they have higher deltas -- the measure of how much an options price will change based on the movement of an underlying stock -- meaning there's a better chance for the option to be in-the-money at the time of expiration. 

Buying ITM options also lessens the impact of time decay, as they carry both intrinsic and time value. This means that even the if underlying value of a stock remains static through a contract's expiration, the trader can sell to close an ITM option and still collect the remaining intrinsic value, thus avoiding a total loss on the trade.

In-the-money contracts, however, are more expensive to enter than their out-of-the-money counterparts. And while the payoffs on an in-the-money trade can be high, the trader could ultimately suffer a bigger loss if the underlying stock moves the wrong way. 

Pros and Cons of OTM Options

While out-of-the-money options are typically viewed as the more "aggressive" of the two, there are potential upsides to purchasing these types of contracts. For one, the cost to buy an OTM option is lower than the cost to buy an ITM option. This is because at the time of the purchase, OTM contracts have no intrinsic value. So, while the potential for a 100% loss is greater, the cost (and risk) to enter the trade is lower.

In the same vein, buying an out-of-the-money contract can give the trader serious leverage if the underlying stock moves in his favor, since the initial cost is relatively low. While all options offer the benefit of leverage, the less money you spend, the more you stand to gain from this feature.

On the other hand, out-of-the-money contracts have lower deltas, so the chances of the trade expiring in the money is slimmer. These contracts are more susceptible to time decay, too. This means that if the underlying stock does not see a dramatic swing in the trader's favor, a 100% loss is likely to occur. 

Which Option Should I Buy?

In conclusion, the choice between in-the-money and out-of-the-money options comes down to a matter of preference. Each alternative offers pros and cons, so it's up to you to decide which features are most appealing.

Plus, bear in mind that your choice may change with each trading opportunity. When you're forecasting a quick, drastic rise in the underlying stock, it might make more sense to buy out-of-the-money options. Conversely, if you anticipate a relatively modest rise over a longer time frame, you may prefer to trade in-the-money options.

Used car retailer Carvana Co (NYSE:CVNA) was last seen down 12.9% at $245.39, despite smashing fourth-quarter earnings estimates and projecting strong growth in 2025. It's unclear what exactly is dragging the stock lower, especially after several analysts lifted their price targets after the event.

The stock's valuation was already high heading into earnings. CVNA notched a three-year high of $292.84 before turning lower yesterday, and the share are up a massive 393% year-over-year. 

Call traders are still optimistic today. So far, 82,000 calls and 50,000 puts have been exchanged, which is six times the options volume typically seen at this point. The March 350 call and weekly 2/28 330-strike call are the most popular, with new positions being opened at the February 230 put. 

This represents a shift in sentiment, as options bears have been targeting the stock at a faster-than-usual rate in the last 10 weeks. This is per CVNA's 50-day put/call volume ratio of 1.52 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which ranks higher than 94% of readings from the past year. 

Walmart Inc (NYSE:WMT) stock is 6.5% lower to trade at $97.27 at last glance, brushing off a fourth-quarter top- and bottom-line beat after blue-chip retailer also issued weaker-than-expected guidance for the fiscal year. For the quarter, Walmart reported adjusted earnings per share of 66 cents on  at $180.55 billion in revenue.

For 2026, Walmart forecasted earnings per share between $2.50 and $2.60, below analyst projections. The company also warned that it wouldn’t be “immune” to potential headwinds from postponed tariffs on Mexico and Canada. The update is rippling across the broader market and contributing to volatility.

The options pits are buzzing with activity. Already, 104,000 calls and 116,000 puts have traded hands today, which is eight times the average intraday volume. The most popular contract by far is the February 95 put, where new positions are currently being opened.

Today's drop has WMT distancing itself from a Feb. 14, record high of $105.30 and slipping below recent support at its 20-day moving average, though the 50-day trendline continues to provide a floor. Despite eyeing its worst day since November 2023, the security boasts an 7.2% year-to-date lead, with a 67.2% year-over-year gain to boot.

Alibaba Group Holding Ltd - ADR (NYSE:BABA) stock is up 12.8% at $141.92 at last glance, after the China-based tech name saw quarterly profits rise thanks to strong cloud and e-commerce growth, beating estimates. The company also announced a 13% year-over-year sales jump, and surpassed revenue expectations for the fiscal third quarter.

BABA yesterday snapped an eight-day win streak, but is now set to resume gains with its biggest single-day percentage gain since March 2023. Today's surge also places the stock at its highest level since November 2021, and well above all short- and long-term moving averages. In the last 12 months, Alibaba stock added 91%, and already sports a 69% year-to-date lead.

Options traders lean bullish on BABA. This is per the stocks' 50-day call/put volume ratio of 4.66 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits higher than 78% of readings from the past year.

Drilling down to today's options activity, 407,000 calls and 139,000 puts have crossed the tape so far, which is 5 times the volume typically seen at this point. The most popular contract is the February 140 call, where new positions are currently being opened.