Article published at 9:30 a.m. CT
JJ Kinahan is Senior Vice President, Head of Retail Expansion and Alternative Investment Products at Cboe Global Markets, Inc. (Cboe).
Key Takeaways:
- Markets calm after hectic week
- Market expects flat CPI results Wednesday
- SpaceX options interest on the upside
The markets are barely budging in early trading after the strongest week we’ve seen since April, spurred by robust momentum in artificial intelligence and earnings beats coupled with disappointing employment numbers – easing interest rate hike fears – that helped the market finish strongly to the upside.
The S&P 500 Index is sliding lower after notching two record high closings and one intraday high last week. The index settled up 0.62% to 7,758 for a 3.6% gain on the week.
The Nasdaq Composite also edged into the red after its big performance last week, driven by a chip-stock bounce that drove Friday’s close 1.3% higher. The tech-heavy index logged a 5.2% move to the upside on the week. The Dow Jones Industrial Average also was dipping early on after inching up on Friday’s close and finishing 3% on the week.
There’s plenty to watch in the options world this week, starting with SpaceX. There was huge retail options interest around its first-ever public earnings print that led to the upside. However, the stock is still about 17% below its Initial Public Offering (IPO) despite the buying. Yes, interest is still to the upside, particularly on the 120 calls for this Friday and the 120, 125 and 130 calls for next week as many are playing this for a return to the $135 IPO price. The probability of touching that level by Sept. 1 is approximately 62%.
The RealReal call volume is 12 times its average and 40 times put volume. Much of the action was around the 12.5 calls that expire next week, which was sparked by a large call buy.
Wednesday’s Consumer Price Index (CPI) is the economic numbers to focus on this week. Wall Street expects the annual rate at 3.4% to 3.5%, flat on a month-over-month basis but up 2.6% year-over-year. Keep a close watch on energy, which is expected to be up 15.7% year-over-year.
In trading, earnings will be in focus again this week, but not on the mega caps that dominated activity last week. Cisco opens its books Wednesday after the close, with an expected move of about 6%, which is higher end of recent moves. The stock climbed nearly 14% after May’s numbers were released, prompted by an AI orders beat. Wall Street is looking for similar numbers in this report.
Applied Materials will offer a read-through on AI, DRAM (dynamic random-access memory) and chip equipment tied to Intel, TSMC, Micron and SK Hynix. The implied volatility is approximately 8% in either direction, which has fallen recently. The interest from an options point of view is focused on the 580 lines. If the stock were to move 8% that implies from $508 to $572 in real money terms.
Speaking of Intel, shares were falling 4.7% to the downside in early trading after the chipmaker said it will offer $15 billion in stock to use for general corporate objectives that could include capital expenditures.
Also on the earnings watch is retail favorite Super Micro Computer tomorrow. The implied volatility is 13% with lots of activity on the 34 and 35 lines, with buying growing. Wall Street is primarily looking for the cash-burn standing and the health of the balance sheet.
CoreWeave is another print to watch after the close Thursday. The expected move is approximately 13%, notably lower than the past few quarters when the move has been 17%. We’re also seeing some put activity on the 85 and 90 names after the stock has recently rallied. Capex and order backlog will be the important numbers here.
Crude oil prices are pushing higher in early trading with WTI Crude Oil prices trending toward $80 range, up 1.6%. However, the Cboe Volatility Index® (VIX®Index) is reflecting a calmer risk-on tone, heading higher by 1.85% to 15.43, still comfortably below 18.
Happy trading!
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