At least two biotech stocks are seeing increased scrutiny in the options pits, with BridgeBio Pharma Inc (NASDAQ:BBIO) and Esperion Therapeutics Inc (NASDAQ:ESPR) moving in opposite directions following their respective drug updates. 

BridgeBio Stock Hits 12-Month High

Last seen up 61.3% to trade at $17.53 and earlier touching a more than one-year high of $19.39, BridgeBio stock is set to lock in its best-ever session, following positive results from the company's dwarfism therapy. Specifically, BridgeBio's infigratinib -- a potential treatment for a form of dwarfism called achondroplasia -- resulted in an increase of 3.03 centimeters per year. 

Options traders seem to be excited about the news. In fact, 9,020 calls and 4,979 puts have crossed the tape so far today, which is 22 times the intraday average volume. The most popular contract is the March 20 call, followed by the 55 put in the same series, with new positions being opened at both.

Esperion Therapeutics Cholesterol Drug Fails to Impress

Esperion Therapeutics stock, meanwhile, is 21.1% lower to trade at $5.01 at last check, after data from a study of the company's cholesterol-lowering drug, Nexletol, failed to wow investors. Digging deeper, questions arose about Nexletol's ability to reduce the risk of heart attacks and other cardiovascular problems for individuals that can't tolerate statins, as well as worries over the drug's potential to increase sales.

The stock's normally quiet options pits are popping with activity as well, with the 7,948 calls and 2,817 puts that have been traded so far today accounting for four times the amount typically seen at this point. The most popular contract by far is the March 5 put, while new positions are being opened at the 5 call from the same monthly series.

Marathon Petroleum Corp (NYSE: MPC) stock is down 1.4% to trade at $131.66 at last check, as China's disappointing growth outlook drags the energy sector lower. The security is up 69.4% year-over-year, however, after surging to a Jan. 27, all-time high of $136.46. This pullback may have created the perfect buying opportunity for investors, too, as the security is currently flashing a bull signal.

According to Schaeffer's Quantitative Analyst Rocky White, MPC's latest peak comes amid historically low implied volatility (IV), which has been a bullish combination for the shares in the past. White's data shows seven similar signals in the past five years when the equity was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) stood in the 20th percentile of its annual range or lower. This is now the case with Marathon Petroleum stock's SVI of 31%, which ranks in the low 2nd percentile of its annual range. 

One month after these signals, MPC was higher 57% of the time to average a 4.4% pop. From its current perch, a move of comparable magnitude would place shares at a fresh record high of $137.45.

While the brokerage bunch already leans bullish, there is still some room for upgrades, which could push the equity even higher. Of the 14 analysts in coverage, four call MPC a tepid "hold."

KB Home (NYSE:KBH) received a double downgrade from J.P. Morgan Securities this morning. The firm slashed its rating to "underweight" from "overweight," with a price-target cut to $32.50 from $36, noting the stock valuation is too high. At last glance, KBH is down 1% at $35.39. 

Support at its 60-day moving average appears to be keeping KBH's losses in check today, though it's worth noting that the overhead $36 level has been pressuring the shares over the last few weeks. Year-to-date, the equity is up 11.4%. 

Of the 16 analysts in coverage, six carried a "buy" or better rating coming into today, with eight saying "hold," and two "sell" or worse. The 12-month consensus price target of $41.27 is a 16.1% premium to current levels. It's also worth noting that short interest makes up 6.9% of the stock's available float, or nearly four days' worth of pent-up buying power. 

Now looks like an opportune time to weigh in with options. The stock is seeing attractively priced premiums at the moment, per KBH's Schaeffer's Volatility Index (SVI) of 34%, which sits in the low 1st percentile of its annual range. 

Stock futures are moving higher this morning, following Friday's slew of weekly wins for the major indexes and an increased focus on Treasury yields. Futures on the Dow Jones Industrial Average (DJIA) and Nasdaq-100 Index (NDX) are up more than 50 points, while S&P 500 Index (SPX) futures sit just above breakeven. Investors are looking ahead to this week's economic data, including factory orders due out after the close today. On Wednesday all eyes will also be on comments from Fed Chair Jerome Powell.

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

• Debit spreads as a way to fight time decay.
• Unpacking a strong kickoff to the new month.
• Plus, upbeat trial data; AAPL's bull note; and a double downgrade for this homebuilder.

5 Things You Need to Know Today

1. The Cboe Options Exchange (CBOE) saw more than 1.3 million call contracts and 822,867 put contracts traded on Friday. The single-session equity put/call ratio dropped to 0.59 and the 21-day moving average stayed at 0.79.
2. The shares of BridgeBio Pharma Inc (NASDAQ:BBIO) are up 54.5% premarket, after the company shared positive data from a mid-stage study of infigratinib, its experimental treatment for achondroplasia, a dwarfism therapy. Year-to-date, the equity is up 42.7%. 
3. Goldman Sachs initiated coverage on Apple Inc (NASDAQ:AAPL) with a "buy" rating, citing the tech giant's services business. AAPL is up 1.8% before the bell, and sporting a 16.2% year-to-date lead. 
4. KB Home (NYSE:KBH) is down 1.9% in electronic trading, after a double downgrade from J.P. Morgan Securities to "underweight" from "overweight," with a price-target cut to $32.50 from $36. The firm noted the stock's high valuation. Over the last 12 months KBH has shed 8.4%.
5. Factory orders are on tap today.

Asian Markets Unpack Updates

Asian markets settled mostly higher on Monday, after China set this year’s growth target around 5%, per the country’s government work report. In other news, South Korea will resume trade talks with Japan following years of tensions over compensation for wartime forced labor. South Korea’s Kospi led the gainers with a 1.2% rise, followed by a 1.1% gain from Japan’s Nikkei. Meanwhile, Kong’s Hang Seng added 0.2%, and China’s Shanghai Composite shed 0.2%.

European markets are mixed, with travel and leisure stocks enjoying tailwinds as mining stocks plummet. Traders are digesting China’s economic update, while eyeing this week’s stateside Fed comments and non-farm payroll data. At last check, both France’s CAC 40 and German DAX are up 0.3%, while London’s FTSE 100 is 0.6% lower.

The Dow rallied more than 380 points Friday for its third-straight daily win, and snapped a four-week losing run. Likewise, the S&P 500 snapped a three-week losing streak, while the Nasdaq scored its best week in a month, and the Cboe Volatility Index (VIX) logged its worst week of the year. Bond yields pulled back earlier today, helping to bolster sentiment on Wall Street.

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

• Why J.P. Morgan is bullish on Procter & Gamble stock.
• Catch up on all of the week's biggest stories.
• Plus, Costco options pop; solar stock hits 14-year high; and a rallying home goods name.

5 Things to Know Today 

1. Amazon.com (AMZN) announced it will pause construction on parts of its second headquarters in Virginia. (CNBC)
2. Questions surrounding Silvergate Capital's (SI) viability dented cryptocurrencies today. (MarketWatch) 
3. Why options traders blasted Costco stock.
4. The solar stock that nabbed a 14-year high.
5. Is this home goods giant poised for a rally?

Gold Logs First Winning Week in More than a Month

Oil futures reversed earlier losses, after the United Arab Emirates (UAE) denied reports that there was an internal debate to leave the Organization of the Petroleum Exporting Countries (OPEC). In addition, optimism over Chinese demand helped April-dated crude futures tacked on $1.52, or 1.9%, to close at $79.68 per barrel. For the week, black gold added 4.4%.

Gold prices broke free from a four-week losing streak, and turned in their fourth winning session in five, after the U.S. dollar eased. Specifically, April-dated gold futures added $14.10, or roughly 0.8%, to settle at $1,854.60 per ounce Friday, and 2.1% for the week.

Subscribers to Chart of the Week received this commentary on Sunday, February 26.

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Schaeffer’s Vertical Options Trader

“Tiiiiime, why you punish me?” Darius Rucker of Hootie and the Blowfish sang that in 1994. It’s an existential song that many an option trader has sung. In the options market, trading stock direction usually involves buying or selling a call or put option. One of the most significant disadvantages of options trading is the erosion of extrinsic value over time, measured by theta.

Never fear, options traders and 90’s alt rock fans, for there is an options strategy that limits the impact of time decay. Earlier this month, subscribers to our Vertical Options Trader service scored a 274% profit in just under two weeks on our recommended Coinbase Global Inc (NASDAQ:COIN) February 17, 55-65 vertical debit call spread. Unpacking the highlights of this trade underscores the utility of the vertical debit spread.

A vertical debit spread is achieved by buying an at-the-money (ATM) option and selling an out-of-the-money (OTM) option in the same expiration month. The credit received from writing the OTM option offsets the entire cost of purchasing the ATM. Unlike other strategies, the risk is limited to the difference between the costs of the extended leg and the income from the short leg. As a result, this type of spread is especially effective when trading options.

Here’s what Senior Market Analyst Joe Hargett had to say about vertical debit spreads: “A vertical debit spread can consist of ATM, OTM or in-the-money (ITM) option contracts – it just depends on your goals for the trade. Bernie’s trade that we’ll get to below uses two OTM options to construct the spread. The credit received from the sold OTM option does not cover the entire cost of buying the purchased option in the spread. The risk is limited to the difference between the credit received from the sold option and the premium paid for the purchased option, while the maximum profit is capped at the difference between the spread between the sold and purchased options and the premium paid for the entire spread. This is both a blessing and a curse for spread trades, in that your upside is clearly capped, (so you have to structure your spread accordingly) but it also sets your target gain from the start of the trade. In other words, you automatically limit your greed with this trade.

As an aside, if you want to hear more from Joe, check out his most excellent podcast debut below!

When COIN was recommended on Jan. 20 by founder and CEO Bernie Schaeffer, the cryptocurrency platform had taken out its 200-day moving average, as speculative assets such as Bitcoin (BTC) sprung back off the mat to hurtle past $20,000 to start 2023. The $10 billion market cap level was reclaimed in the process, and the shares were testing support at 50% above its Jan. 6 lows.

Bernie also noted a November 2022 cover story from The Economist, titled “Crypto’s Downfall.” We’ve discussed the cover story fallacy in this space before, but COIN’s recent strong price action offered up some contrarian implications that couldn’t be ignored. With these trade drivers in mind, the spread went as follows: buying (to open) the February 17, 2023 55-strike call and selling (to open) the February 17, 2023 65-strike call.

With COIN trading at $49.92, the stock proceeded to gap higher by 11.6% the next trading day. It then rattled off outsized moves of 15.8% on Jan. 27 and 12.4% on Feb. 1, trading as high as $65.30. The next day on Feb. 2, COIN gapped higher again, and trading at $71.50, Bernie instructed subscribers to sell 50% (first half) of the vertical debt spread position. The next day, with COIN trading at $73.16, the second half of the position was closed, for a total overall profit of 274%. Options traders had nearly quadrupled their money in the span of two trading weeks.

This was, in a way, the perfect options trade. It factored in contrarian indicators for the underlying equity, macro tailwinds, and a strategy catered to stocks expected to move strongly in the period encompassed by the date of recommendation to the option expiration date in the following month.

FREE: Schaeffer’s Top 2023 Stock Picks!

Schaeffer's Market Mashup Podcast: Threading the Needle With Joe Hargett

March is already looking up for Wall Street, after February brought investors back down to earth. All three major indexes are headed for weekly wins and will snap their respective weekly losing streaks. Bond yields were in focus most of the week, with the 2-year Treasury yield hitting its highest level in 10 years, while the 10-year Treasury yield jumped above 4%. 

Earnings Reports Rule the Roost

Earnings season remains in full swing, for at least one more week. Li Auto Inc's (LI) strong outlook gave the electric vehicle (EV) sector a boost early in the week, while Zoom Video Communications Inc (ZM) issued an upbeat forecast as well. Retail giant Target Corp (TGT) reported its first earnings beat in a year. Options traders also had field days after earnings reports from AMC Entertainment Holdings Inc (AMC), Lowe's Companies Inc (LOW), Kroger Co (KR), and Costco Wholesale Corporation (COST). 

Tesla's "Master" Plan

Tesla Inc's (TSLA) investor day was a big highlight this week, with CEO Elon Musk revealing his "Master Plan 3." Union Pacific Corporation (UNP) surged after the company revealed its CEO succession plan, while Reata Pharmaceuticals Inc (RETA) broke out after the U.S. Food and Drug Administration (FDA) approved its rare genetic disorder treatment. Novavax Inc (NVAX), meanwhile, plummeted after the company questioned its ability to stay in business. 

Jobs Data Looms Next Week

A handful of earnings and economic data are due out the first full week of March. In the meantime, take a look at S&P 500 trendlines to watch according to Schaeffer's Senior Vice President of Research Todd Salamone, plus, the best stocks for options traders since the start of 2022, according to Schaeffer's Senior Quantitative Analyst Rocky White. 

J.P. Morgan Securities this morning upgraded Procter & Gamble Co (NYSE:PG) to "overweight" from "neutral," with a price-target hike to $155 from $150, saying the blue-chip giant could be an "earnings compounder." At last glance, PG was up 0.5% at $140.62. 

On the charts, PG has been been dealing with both pressure at the $141 level and from its 100-day moving average since early February. Year-to-date, the equity is down 7.3%. 

Of the 28 analysts in coverage, 17 now carry a "buy" or better rating, with 10 a "hold," and one "strong sell." The 12-month consensus price target of $155.02 is a 10.6% premium to current levels. 

Options traders have been much more bullish than usual over the past couple weeks. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), PG's 10-day call/put volume ratio of 3.44 ranks higher than 94% of readings from the past year. 

Now could be a good time to weigh in on the security's next move with options. The stock is seeing attractively priced premiums at the moment, per PG's Schaeffer's Volatility Index (SVI) of 17%, which sits in the very low 2nd percentile of its annual range. Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) of 94 out of 100 means the stock has exceeded option traders' volatility expectations during the past year.