Stocks started the week strong, as geopolitical risk eased and earnings from heavy hitters like Netflix (NFLX) and UnitedHealth (UNH) impressed. The major market indexes were trading near levels not seen since mid-March when the closing bell rang Tuesday -- with the Cboe Volatility Index (VIX) flashing this never-before-seen signal -- but quickly began paring these gains as earnings optimism waned and chip stocks sold off on signs of an industry-wide slowdown. But while the indexes are poised to close Friday with a slump, they're all holding on to weekly gains.

Apple, Chip Stocks Sell Off

In addition to IBM's (IBM) earnings reaction, one of the major drags on the stock market at week's end was Apple (AAPL), with the shares pacing for a 4.7% weekly loss -- and third straight down day. Sparking the sell-off was a round of pre-earnings bear notes, as well as a warning on cooling smartphone demand from Taiwan Semiconductors (TSM). The firm's soft forecast also exacerbated weakness in chip stocks, which began spiraling mid-week on a rare shipment miss for Lam Research (LRCX). But while one analyst said to buy the dip on Applied Materials (AMAT), Barclays took the glass-half-empty approach to Advanced Micro Devices (AMD).

FAANG News, Tesla Update

Elsewhere in the FAANG sphere, Amazon (AMZN) unveiled a big partnership with Best Buy (BBY), and options traders are upbeat ahead of earnings. Bullish traders are targeting Alphabet (GOOGL) ahead of its quarterly results, too, while MKM Partners said Twitter should stay shielded from the fallout surrounding Facebook's (FB) data scandal.

Several optical component stocks sold off this week, too, after a Commerce Department ban on U.S. sales to China's ZTE Corp. pressured suppliers. Wall Street newcomer Dropbox (DBX) also took a trip south -- on track for its third straight weekly loss -- while Tesla (TSLA) stock couldn't overcome a Model 3 production halt, even after the company set an assembly target of 6,000 units per week by the end of June.

Bank Earnings

Wall Street continued to give a lackluster reaction to bank earnings, with shares of Bank of America (BAC) and Morgan Stanley (MS) finishing flat post-earnings, and Goldman Sachs (GS) selling off. The muted price action came even as the companies reported profit beats, suggesting too much optimism was priced in ahead of earnings -- though American Express (AXP) stock gapped higher after the big-cap credit card name unveiled its results.

Retail, Energy Stocks With Cheap Options

Looking to the retail sector, Ulta (ULTA) is headed toward its best week since early January, after Guggenheim upgraded the stock to "buy." The same can't be said for Skechers (SKX), though, which is plummeting post-earnings. And while one options trader set a low bar for Shopify (SHOP) -- even with the stock sporting a big week-to-date gains -- Credit Suisse eyed record lows for this food stock. Restaurant stocks Wendy's (WEN) and Chipotle (CMG) were targeted for breakouts by analysts.

These two retail stocks took a hit from late-week selling pressure, but if past is precedent, it could be time to bet on a bounce with call options. These two energy stocks also have cheap options right now, even with earnings on the horizon. In fact, both are set for weekly wins, despite today's downside in oil prices -- sparked by a tweet from President Donald Trump.

Ways to Trade Earnings Season

Looking ahead, FAANG earnings heat up next week -- though these 25 stocks could spark options-trading ideas for premium buyers over the next several weeks. And for shareholders who are anxious about the uncertainty of earnings, this options strategy could help ease some of the stress.

The U.S. stock market is in the red today, but still on track for a weekly win. Among individual stocks making big moves are toymaker Mattel, Inc. (NASDAQ:MAT), Apple supplier Qorvo Inc (NASDAQ:QRVO), and photocopy specialist Xerox Corp (NYSE:XRX). Here's a quick look at what's moving shares of MAT, QRVO, and XRX.

Pre-Earnings Mattel Put Options Popular

Mattel stock hit a nine-year low of $12.21 earlier, and was last seen trading down 4.9% at $12.79. Pressuring the shares is news the company's CEO Margaret Georgiadis is resigning after just 14 months on the job -- a time frame in which the stock has surrendered more than 50%. She will be replaced by board member and former head of Maker Studios Ynon Kreiz, effective April 26.

Several Mattel options traders appear to be betting on even bigger losses over the next several weeks, which includes the toymaker's earnings report, due out after next Thursday's close. Bucking the recent bullish trend, early 13,000 puts have traded so far -- nearly nine times what's typically seen at this point in the day -- with buy-to-open activity detected at the weekly 4/27 12.50-strike and May 12 puts.

Bullish Options Prices Drop With Qorvo Stock

Qorvo shares are 0.5% lower today at $70.31 -- hit by headwinds from Apple (AAPL) and a price-target cut to $75 from $80 at Citigroup. The stock has sold off sharply since topping out at a two-year high of $86.84 last month, and a recent rebound attempt was quickly halted near $74. This level coincides with a 61.8% Fibonacci retracement of QRVO's January-through-March surge.

Against this backdrop, short-term call options are pricing in remarkably low volatility expectations compared to their put counterparts. QRVO's 30-day implied volatility skew of 10.3% ranks in the 91st annual percentile.

Xerox Stock Pops on Reports of Fujifilm Renegotiations

Xerox stock is trading up 3.8% at $31.47, amid reports the company is renegotiating a joint venture deal with Japan's Fujifilm, valued at roughly $6.1 billion. The deal has been opposed by XRX shareholders Darwin Deason and Carl Icahn, who both say it undervalues the printing firm.

XRX shares are now on track for their highest close since Feb. 2, and headed for their biggest weekly gain since January 2017 -- up 11.4% so far. Options traders are targeting even more upside over the next four weeks. Xerox's May 30 call has seen the biggest rise in open interest over the last two weeks, and data from the major options exchanges confirms the contracts were mostly bought to open.

Shares of heavy machinery maker Caterpillar Inc. (NYSE:CAT) are 1.5% higher in pre-market trading, after the stock received an upgrade from Citigroup to "buy" from "neutral." The brokerage firm said it expects upbeat earnings and construction growth in China to help the Dow stock outperform in the near term. However, the analyst in coverage cautioned on trade war uncertainty, and lowered its CAT price target to $180 from $185 -- still a 17.5% premium to Friday's close at $153.25.

Looking closer at the charts, CAT recently bounced from its 160-day and 200-day moving averages -- a reliable "buy" signal in the past. The shares have since added nearly 12%, and are back above their 50-day moving average after trading below here in March.

The stock could continue this momentum, too, if past is precedent. Caterpillar is expected to report first-quarter earnings before the bell tomorrow. Looking into its earnings history, CAT has finished higher the day after the company reports in each of the past four quarters, including a nearly 8% jump this time last year. The stock's average post-earnings daily price move is 3.3%, looking back eight quarters, regardless of direction. This time around, the options market is pricing in a 6% next-day move either way -- almost twice the norm -- per Trade-Alert.

Options traders appear to be bracing for another post-earnings move higher. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows CAT with a 10-day call/put volume ratio of 1.62. This ratio ranks in the 88th annual percentile, suggesting calls have been purchased over puts at a faster-than-usual clip during the past two weeks.

As the telecom company prepares to report earnings before the open tomorrow, Tuesday, April 24, Verizon Communications Inc. (NYSE:VZ) just received its second analyst upgrade in the past month. Barclays this morning lifted its outlook on VZ shares to "overweight" from "equal weight" and set a $56 price target, suggesting unwarranted concerns have made the stock too cheap. As such, the Dow component is pointed 1.2% higher in pre-market trading, after closing Friday at $47.90.

Bulls will be hoping tomorrow's earnings release will help the equity overcome recent congestion in the $48-$50 region. Not only did this area act as resistance from August to October last year, but it's also home to the 200-day moving average. Overall, the shares have so far shed almost 10% in 2018.

As for the blue chip's earnings history, the day after earnings has often produced only muted stock moves. Specifically, the shares have swung 2.7% the day after earnings on average, going back two years. Following the company's earnings release a year ago the shares slipped 1.1%. This time around, though, implied volatility data is pricing in a 4.8% move for tomorrow's session.

And ahead of the event, sentiment has been bullish in the options pits. In fact, the 10-day call/put volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 4.10, showing call buying has quadrupled put buying in the past two weeks. Plus, this reading ranks in the 87th annual percentile, so such a preference for calls over puts is highly unusual.

Akorn, Inc. (NASDAQ:AKRX) stock is down 35% to trade at $12.79, and fresh off a new five-year low of $12.40. AKRX stock is among the worst on the Nasdaq so far today, after Germany's Fresenius pulled out of its planned $4.75 billion acquisition of Akorn, citing evidence of misconduct in reporting drug developments to the Food and Drug Administration (FDA). However, Akorn is firing back, saying Fresenius' attempt to terminate the deal based on findings from an ongoing investigation constitutes a breach of the merger agreement and is "completely without merit."

Akorn stock has now shed a whopping 60% so far in 2018. Doubts about the Fresenius deal first emerged in late February, when the prospective buyer announced an independent investigation into Akorn's "alleged breaches" of FDA data integrity requirements, sending AKRX shares gapping lower.

Plenty of short sellers are likely cheering today's news. The 10.54 million shares sold short represents more than 11% of AKRX's total available float.

In the options pits, put buyers have been prevalent. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows AKRX with a 10-day put/call volume ratio of 2.82, indicating AKRX puts have nearly tripled calls during the past two weeks.

The June 17.50 put is home to notable open interest, with a healthy amount of buy-to-open activity indicated in late February, around the time of the aforementioned bear gap. This suggests options traders were banking on AKRX to continue its freefall into the summer months, possibly as a result of a scrapped buyout deal. These puts are now comfortably in the money today.

A number of Dow stocks are getting upgraded this morning, including Merck & Co., Inc. (NYSE:MRK). Specifically, Goldman Sachs lifted its rating on MRK to "buy" from "neutral," and added the pharmaceutical name to its "Americas Conviction List." The brokerage firm waxed optimistic about Merck's lung cancer drug Keytruda, saying the success of the treatment could drive MRK shares up to $73 -- versus its previous price target of $63 -- a 24% premium to Friday's close at $58.83.

In reaction, MRK has jumped 2.6% to trade at $60.33 -- a round level that corresponds with a late-October bear gap, and has served as a ceiling since the stock market correction earlier this year. However, the equity's trend has been higher since bottoming at a nearly two-year low of $52.83 at the start of April.

Options traders have been betting on more upside, too, ahead of Merck's May 1 earnings report. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 3.41 ranks in the 71st annual percentile, meaning calls have been bought to open over puts at a faster-than-usual clip.

Diving deeper, the May 60 call has seen the biggest increase in open interest over this two-week time frame, with 12,085 positions added. Data from the major options exchanges confirms mostly buy-to-open activity here, pointing to expectations for a round-number breakout by front-month options expiration at the close on Friday, May 18.

Amid Merck stock's recent price action, these bullish options are getting pricey. MRK's 30-day implied volatility skew of 9.8% ranks in the 30th annual percentile, indicating puts are pricing in lower volatility expectations than their call counterparts.

Prothena Corporation (NASDAQ:PRTA) said it is discontinuing the development of its drug NEOD001, used to treat patients with AL Amyloidosis. The end of the program comes after the company's lead drug failed in both a mid-stage study and a late-stage trial, and PRTA stock has plummeted 68.1% to trade at $11.76 -- earlier tagging a four-year low of $11.05.

The shares are easily on track for their worst day ever, but Prothena was struggling on the charts heading into today's trading -- down almost 50% from their late-September annual high of $70 to last Friday's close at $36.84.

Recent downside has come amid increased selling pressure from shorts. Short interest shot up more than 31% in the two most recent reporting periods to 4.33 million shares -- accounting for 11.3% of the stock's available float. While short sellers are likely cheering today's bear gap, they will be sidelined for the time being, with PRTA on the short-sale restricted list.

However, the spiraling stock is now at risk for a round of bearish brokerage notes, which could spark even more selling. All but one of the nine analysts following Prothena stock maintain a "buy" rating -- with not one "sell" recommendation on the books -- and the average 12-month price target sits all the way up at $73.09.

The broader stock market has erased its modest lead ahead of this week's onslaught of corporate earnings reports. Among individual stocks to watch are aluminum giant Alcoa Corp (NYSE:AA), Bowflex parent Nautilus, Inc. (NYSE:NLS), and homegoods retailer Pier 1 Imports Inc (NYSE:PIR), which are all seeing wild price action. Here's a quick look at moving shares of AA, NLS, and PIR.

Rusal Extension Levels Alcoa Stock

Alcoa stock has plunged 13.9% to trade at $51.64 -- its worst day since the company split back in October 2016 -- after the U.S. Treasury Department extended the deadline to Oct. 23 from June 5 for Americans to end business dealings with Russian aluminum firm Rusal as part of a broader set of sanctions imposed on Moscow. Additionally, the Trump administration is reportedly considering easing sanctions on Rusal if Oleg Deripaska gives up control of the company.

This price action marks a sharp reversal from AA stock's recent trajectory. In fact, the shares were up more than 33% for April heading into today's trading, and hit a post-split record high of $62.35 last Thursday after earnings -- prompting Deutsche Bank this morning to boost its price target to $70 from $60.

Alcoa is now down 4.4% year-to-date, though, and one group of traders is likely kicking rocks. Short interest fell 22.7% in the two most recent reporting periods to 6.86 million shares -- the fewest number of bearish bets since Nov. 1.

Nautilus Stock on Track for Best Day Since August 2016

Craig-Hallum initiated coverage on Nautilus with a "buy" rating and $19 price target -- a level not seen since last July. The brokerage firm said new product launches should help spark growth, and called NLS a "compelling investment opportunity." In reaction, NLS stock is trading up 11.2% at $14.95 -- pacing for its best day since Aug. 2, 2016, and its first close north of its 200-day moving average since July 27.

More broadly, the action among analysts has been mixed. At last Friday's close, three brokerage firms maintained a "strong buy" rating, versus three others that issued "hold" recommendations on the stock. The average 12-month price target, meanwhile, is docked at $16.22, a lukewarm 8.9% premium to current trading levels.

Pier 1 Imports Stock Plummets After Downgrade

Pier 1 Imports stock is down 9.7% to trade at $2.39, earlier hitting an eight-year low of $2.37. Sparking the sell-off is a downgrade to "underperform" from "market perform" at Raymond James, which said to "exit the shares now" before management begins executing a strategic initiative that will likely not create growth until 2021.

PIR stock is now staring at a 66.4% year-over-year deficit, and short sellers have started cashing out of their winning bets. Short interest fell 18.6% between the March 1 and April 1 reporting periods to 11.09 million shares. This still represents a healthy 14.8% of the retailer's available float, though.

GrubHub Inc (NYSE:GRUB) stock is trading higher, after D.A. Davidson raised its price target to $100 from $80. This comes just after the Sohn Conference kick-off, where Li Ran from Half Sky Capital said that GrubHub "is the leading online food delivery platform in the U.S.," and waxed optimistic on the firm's North American growth potential, particularly among millennials. Further, Ran's upside target for GRUB stock is $160 per share -- a more than 55% premium to the current stock price.

GrubHub shares are currently up 0.8% to trade at $103.01. GRUB stock has picked up nearly 200% over the past year, touching a record high of $112.41 on March 13. Since then, the equity has taken a breather, but found support atop its rising 50-day moving average.

There's room for more upbeat analyst attention, too, as the average 12-month price target of $102.45 is a discount to GRUB's current price. Plus, the majority of analysts maintain "hold" or "strong sell" ratings, meaning GRUB could enjoy upgrades in the near future.

Short interest on GRUB rose 18% during the most recent reporting period, and now represents 21% of the stock's total available float. At GrubHub stock's average daily trading volume, it would take just over a week for the shorts to cover their bearish bets. That's plenty of fuel for a potential short squeeze to send the stock to higher highs.

The security's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.83, which ranks in the 82nd percentile of its annual range. Though the ratio indicates that short-term calls still outnumber puts on an absolute basis, the elevated percentile indicates that near-term traders have rarely shown a greater preference for GRUB puts over calls in the last year. An exodus of option bears could also fuel the security's fire.

Lastly, those who have bought premium on GRUB stock have been consistently rewarded over the last 12 months. The stock's Schaeffer's Volatility Scorecard (SVS) of 93 out of 100 indicates that GrubHub shares have easily exceeded options traders' volatility expectations in the past year.

Home improvement stocks Home Depot Inc (NYSE:HD) and Lowe's Companies, Inc. (NYSE:LOW) are both trading higher this morning, after Wells Fargo initiated coverage with an "outperform" rating, and set its price targets on the retail stocks to $205 and $100, respectively. The brokerage firm believes broad macroeconomic factors will be a boon for both HD and LOW, and said the former is at an attractive entry point and the latter is poised to gain market shares. 

Short Sellers Have Abandoned Home Depot Stock

At last check, Home Depot stock was up 0.9% to trade at $179.33. The $205 price target sits in territory the equity has not seen since its Jan. 29 record high of $207.61. Although the shares recently turned in their worst quarter in years, the pullback appears to have been contained by their 200-day moving average. Overall, HD has added 18% in the past 12-months.

Plenty of HD short sellers are abandoning ship. The 8.85 million shares sold short is down by half since mid-September, and short interest fell by 20% in the most recent reporting period. A continuation of this short-covering activity should provide more tailwinds for the equity.

Options Traders Grow Bearish as Lowe's Stock Churns

Lowe's stock is up 0.7% to trade at $84.50. Similar to Home Depot, LOW stock shot to a record high of $108.98 on Jan. 25, and then promptly reversed course amid the stock market correction. Since a late-February bear gap, the equity has traded within a tight range just above the $84-$85 area, which coincides with the stock's 200-day trendline and its year-over-year breakeven mark.

In the options pits, put buying has picked up in recent weeks. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows LOW with a 10-day put/call volume ratio of 0.96, a ratio that ranks in the 93rd percentile of its annual range.

The shares of drugmakers Incyte Corporation (NASDAQ:INCY) and Epizyme Inc (NASDAQ:EPZM) are getting crushed this morning, as the stocks react to Food and Drug Administration (FDA) buzz. What's more, analysts are cutting their price targets on INCY and EPZM stocks -- both of which could be vulnerable to additional bearish brokerage attention.

INCY Stock Eyes Worst Month in Years

An FDA panel last night recommended the regulatory body not approve a higher dose of baricitinib, an arthritis drug developed by Incyte and Eli Lilly (LLY). As such, INCY stock is down 4.6% to trade at $65 -- within striking distance of its two-year low of $61.30, touched on April 9.

It's been a brutal month, in particular, for Incyte shares, which have shed 22.2% already in April -- set for their worst month since January 2016. The equity gapped lower to start the month, after the company ended the study of its cancer drug, epacadostat, used in combination with Merck's (MRK) Keytruda.

In the wake of the FDA panel recommendation, SunTrust Robinson cut its price target on INCY shares to $75 from $80. There could be more price-target reductions on the horizon for the drug stock, too, as the average 12-month price target of $81.31 represents a premium of more than 25% to INCY's price. Meanwhile, 13 out of 18 analysts maintain "buy" or better opinions on the shares, leaving the security vulnerable to potential downgrades.

EPZM Stock Plummets On FDA Hold

Meanwhile, the FDA put a partial clinical hold on new enrollments for Epizyme's trial of key cancer drug tazemetostat, after a pediatric patient developed secondary T-cell lymphoma. EPZM stock is among the worst of the Nasdaq this morning, down 14.1% at $13.15. The shares are now testing a trendline that's connected a series of lower highs since late 2016, and are set for their lowest close of 2018.

In the wake of the halted tazemetostat trial, Wedbush and SunTrust Robinson both cut their price targets on Epizyme shares to $20. Again, additional price-target cuts could be coming for EPZM, as the consensus of $24.78 represents a whopping 87% premium to the equity's current price. In the same vein, eight of nine analysts following the drug stock maintain "strong buy" or "buy" opinions.

Shares of Dynagas LNG Partners LP (NYSE:DLNG) plunged 8.4% last Wednesday, April 18, after the energy transportation company cut its quarterly dividend in order to generate long-term cash flow. Today, however, Wells Fargo downgraded DLNG stock to "underperform" from "market perform," and slashed its price target to $6 from $13, saying the move may not be enough to overcome "liquidity hurdles."

In reaction, DLNG shares have plummeted 3.8% to trade at $9.13, hitting a two-year low of $8.49 out of the gate. This recent price action just echoes the stock's trend over the past 12 months, with Dynagas down 46% year-over-year. What's more, the equity has failed to capitalize on rising oil prices, shedding nearly 10% so far in April, even as crude futures boast a 5.9% month-to-date gain at this point.

As such, embattled Dynagas stock is at risk for more downgrades and/or price-target cuts, which could exacerbate the equity's troubles. At last night's close, two of six analysts maintain a "buy" rating on DLNG -- with not one "sell" on the books -- while the average 12-month price target of $12.69 is a 41% premium to present trading levels.

Although currently on the short-sale restricted (SSR) list, more selling from shorts could keep pressure on DLNG stock. Though short interest jumped 11.7% in the most recent reporting period to 430,000 shares, these bearish bets account for just 2.2% of the stock's available float.