Subscribers to Chart of the Week received this commentary on Sunday, March 19.

The Financial Select Sector SPDR Fund (XLF) is a diversified fund that covers a variety of industries in the banking realm, which – if you haven’t heard -- has seen copious amounts of attention over the past week and a half. Following the SVB Financial Group's (SIVB) collapse exactly two weeks ago, Wall Street has been a canister of chaos, with many investors once more looking to the government for solution and direction. While some worries have been stemmed, others have buoyed, though more ease came the morning of this writing, when First Republic Bank (FRC) received its own defibrillator.

No fewer than 11 bank names, including Bank of America (BAC) and Goldman Sachs (GS), rounded up $30 billion to aid their sector peer from joining SIVB in the mausoleum. However, the major indexes are eyeing yet another steep daily loss, while the XLF also sits deep in the red at midday.

Several technical indicators are making this pullback especially interesting for XLF. Back in 2008 amid the historic financial crisis, XLF calls were used as a hedge to the process of mass shorting finance stocks. The government subsequently placed a regulatory ban against short-selling finance stocks -- mostly out of fear that the practice was driving the steep price drops on the market. The ban was eventually lifted due to restrictive challenges that would exacerbate broader-market pullbacks. Below you can take a closer look at the movement of short interest (blue) vs. the stock’s share price (black).

Historically, the buy-to-open call/put ratio has soared simultaneously alongside shorting activity. However, per Schaeffer’s Senior V.P. of Research Todd Salamone, the ratio declined when the regulatory ban took place. As of March 13, the put/call ratio sits at 0.61, and the heavy selling on XLF has caused an increase in another favorite indicator of Schaeffer’s.

The gamma-weighted Schaeffer’s Open Interest Ratio (SOIR) is unique because while the latter SOIR looks at open interest from the front three expiration months, the gamma-weighted scans open interest depending on the option’s gamma. For the gamma-weighted SOIR, we multiply the option’s gamma by its put open interest, and then we multiply it by the option’s call open interest. Dividing the gamma-weighted puts by the gamma-weighted calls gets us the gamma-weighted SOIR. This indicator gives higher importance to open interest that is near-the-money, and disregards open interest that is either deep in-the-money, or deep out-of-the-money.

With that said, the Financial Select Sector SPDR Fund is carrying a gamma-weighted SOIR of 2.64, which, per history, is a bullish indicator. In other words, if the stock rises, it makes a trader’s put options less likely of being in-the-money and decreases chances of having to pay out money at expiration. As the stock price goes up, the trader can cover their short position, which is a further tailwind for the stock and its sector peers amid a historically volatile period.

Wall Street kicked off the week on a high note, with the Nasdaq Composite Index (IXIC) scoring its fifth win in six session. The Dow Jones Industrial Average (DJI) went on to score its third triple-digit gain in four days, though things turned around midweek following a quarter-point interest rate hike from the Federal Reserve. The Dow, Nasdaq and, S&P 500 Index (SPX) scored wins toward the end of the week as regional bank stocks continued to lag, and though they're lower today, all three benchmarks are pacing for weekly wins.

GameStop Posts Surprise Quarterly Profit

Multiple big-name companies chimed in with earnings this week. Meme stock darling GameStop (GME) surprised investors after reporting its first quarterly profit in two years, which helped GME log its best session since March 2022. Options traders were thrilled with Foot Locker's (FL) top- and bottom-line beats, while Olive Garden parent Darden Restaurants (DRI) fell despite a beat-and-raise. Stronger solar module shipments helped Canadian Solar (CSIQ) topple expectations, and Accenture (ACN) trimmed its annual revenue guidance and announced a big round of layoffs.

Amazon.com Announces More Job Cuts

Accenture wasn't the only tech name that announced layoffs, as Amazon.com (AMZN) announced it will cut 9,000 jobs in two of its highly-successful division. Ford Motor (F) revealed financial details in its electric vehicle (EV) unit, including a $2.1 billion loss.  Nvidia (NVDA) was praised by analysts after revealing its artificial intelligence (AI) tool. The embattled bank sector saw some positive updates, with New York Community Bancorp (NYBC) agreed to buy deposits and loans from Signature Bank (SBNY), and PacWest Bancorp (PACW) announced its deposits movements stabilized. 

How to read Wall Street's "Fear Gauge"

The last week of March is jam-packed with pertinent economic data, while the earnings docket features a report from blue-chip Walgreens Boots Alliance (WBA). In the meantime, Schaeffer's Senior V.P. of Research Todd Salamone advises investors to stay cautious as the "fear gauge" approaches a crossroads. Plus, a bank exchange traded fund (ETF) flashing a short-term bullish signal, per Schaeffer's Senior Quantitative Analyst Rocky White. 

Several members of the energy sector are sliding alongside oil prices today. Renewed bank concerns are weighing on black gold, as well as demand prospects as the U.S. holds off on refilling its strategic reserve, which may take several years, according to U.S. Energy Secretary Jennifer Granholm.

Marathon Oil Corp (NYSE:MRO) is down 1.9% at $21.57 at last glance, and on track for its third-straight daily loss after shares were turned away at the $23 level. Heading back toward this month's seven-month lows, the equity is down 20% year-to-date.

It's also worth noting that this month's slide sent MRO below its 320-day moving average for the first time since January 2021. The stock is overdue for a short-term bounce, however, as per its 14-day relative strength index (RSI) of 26.8, which sits in "oversold" territory. 

The shares of Exxon Mobil Corp (NYSE:XOM) are in the same boat, down 1.8% at $101.60. The stock's most recent pullback has it running into long-term support at its  250-day moving average. Year-over-year, XOM is up 21.9%, though it carries a 7.8% year-to-date deficit.

Options bears have been taking more of an interest in Exxon Mobil stock lately. The security's 10-day put/call volume ratio of 1.35 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 88% of readings from the past year. 

Shares of German lender Deutsche Bank AG (NYSE:DB) are 6.6% lower this morning, after a spike in credit default swaps increased worries about the European baking sector's stability. Credit default swaps, or the cost of insuring the bank's debt against the risk of default, hit more than four-year highs.

Today's drop has DB trading just above $9, or their lowest level since October. A confluence of long- and short-term moving averages are weighing on Deutsche Bank stock, as it heads for its third-straight weekly loss. Year-to-date, the equity is down 16.2%.

Put traders are jumping in on the action, with 22,000 bearish bets crossing the tape already today -- 13 times the average intraday amount. The most popular contract is the April 9 put, while new positions are being opened at the weekly 3/24 9-strike put.

This preference for bearish bets is nothing new. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Deutsche Bank stock sports a 10-day put/call volume ratio of 12.72, which ranks higher than 87% of readings from the past year, showing puts outpacing calls and being picked up at a faster-than-usual rate. 

Futures on the Dow Jones Industrial Average (DJI) are down 331 points this morning, as Deutsche Bank's (DB) sharp drop reignites sector concerns, after the firm's credit default swaps spiked. S&P 500 Index (SPX) and Nasdaq Composite Index (NDX) futures are firmly lower as well. Meanwhile, durable goods orders fell 1% in February, compared to an estimated 0.3% drop. For the week, all three indexes are pacing toward notable wins.

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

• 3 stocks that staged big swings yesterday.  
• How to sell options in today's market.  
• Plus, Scholastic's revenue disappoints; INCY drops on FDA rejection; and SQ looks to extend its fall. 

5 Things You Need to Know Today

1. The Cboe Options Exchange (CBOE) saw more than 1.2 million call contracts and 933,443 put contracts traded on Thursday. The single-session equity put/call ratio rose to 0.77 and the 21-day moving average stayed at 0.79.
2. Scholastic Corp (NASDAQ:SCHL) is down 11.7% premarket, after the company posted a drop in revenue for its fiscal third quarter, and a disappointing annual forecast. Heading into today, SCHL is up 4.7% year-to-date. 
3. Incyte Corporation (NASDAQ:INCY) is down 3.3% before the bell. The U.S. Food and Drug Administration (FDA) rejected the pharmaceutical name's extended-release version its blockbuster cancer drug, Jakafi. Year-to-date, INCY is down 10%. 
4. Block Inc (NYSE:SQ) is looking to extend yesterday's Hindenburg-induced bear gap, following a downgrade from Atlantic Equities to "neutral" from "overweight," though BofA Global Research stated the shares are "overreacting" to the short seller report. Year-over-year, SQ is down 54.3%. 
5. Today will bring the S&P Global U.S. services and manufacturing purchasing managers' indexes (PMI).

Stocks Lower in Asia, Europe

Asian markets settled lower on Friday, as investors continued to scrutinize the U.S. banking system and the possibility of federal support. Hong Kong’s Hang Seng shed 0.7%, while China’s Shanghai Composite lost 0.6%. Meanwhile, South Korea’s Kospi fell 0.4%, and Japan’s Nikkei finished 0.1% lower.

European markets are also lower on the heels of this week’s interest rate hikes and lingering bank sector fears, especially amid rising credit default swaps for DB. In other news, the latest S&P composite PMI showed Euro zone economic growth surged to a 10-month high this month. At last glance, the German DAX is down 2.4 %, France’s CAC 40 is 2.3% lower, and London’s FTSE 100 carries a 1.9% deficit.

The Dow pared triple-digit gains this afternoon -- and even briefly dipped into the red -- to settle only modestly higher, despite earlier tracking toward its best single-session win since Jan. 6. Regional bank stocks continued to lag, while the tech sector rallied as investors became more confident in cooling Treasury yields and a slower pace of interest rate hikes. The tech-heavy Nasdaq scored its third gain in four sessions, while the S&P 500 also finished higher.

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

• How profitable is Ford's EV business?
• Accenture stock popped after layoffs.
• Plus, no post-earnings pop for DRI; how to sell premium; and the schedule next week.

5 Things to Know Today 

1. Get ready: Short video app TikTok is facing increasing congressional pressure. (Reuters)
2. More than 148,000 tech sector employees have been let go since the start of 2023 at 505 firms, on track to outpace last year's tech layoffs. (MarketWatch)
3. Restaurant stock slipped despite hiking guidance.
4. How to sell options premium in this market.
5. End of March set to bring economic data deluge.

Gold Surges as Oil Breaches $70

Oil prices settled lower on Thursday, slipping back below the $70 mark after just conquering it in the previous session. Lingering concerns over the financial sector weighed on black gold today. April-dated crude shed 94 cents, or 1.3%, to close at $69.96 per barrel on the day.

Gold prices moved sharply in the opposite direction to settle at their highest level in more than a year. Investors rushed to the safe-haven asset after the growing indication that a hawkish Fed could soon wind down its rate hike cycle. April-dated gold rose $46.30, or 2.4%, to settle at $1,995.90 per ounce.

Stocks are rebounding as Wall Street continues to unpack yesterday's interest rate hike, with investors considering the Fed's policy for the rest of the year. In the meantime, here are three stocks making big moves today. 

Hindenburg Sends Block Stock Tumbling

Block Inc (NYSE:SQ) is down 14% at $62.47 at last glance, earlier trading as low as $56.50 after notorious short seller Hindenburg Research published a new position on the stock, saying it has "wildly overstated its genuine user counts and has understated its customer acquisition costs." Year-over-year, the equity is down 56.3%, currently trading around its year-to-date breakeven level. 

So far today, 334,000 calls and 330,000 puts have been exchanged, which is already 5.6 times the stock's typical daily volume. The Weekly 3/24 65-strike call is the most active contract, with new positions being opened there as well as the next 33 most popular positions. 

Riot Stock Jumps Alongside Crypto

Conversely, Riot Platforms Inc (NASDAQ:RIOT) is soaring today, up 17.2% at $9.48 at last check, as the shares enjoy tailwinds from the cryptoverse. Bitcoin (BTC) is staging a rebound, while several other cryptocurrencies move higher as well. Now trading at its highest level since August, RIOT is up 178.2% year-to-date. 

Options traders are targeting the security at double the intraday average, with 111,000 calls and 50,000 puts across the tape so far. The weekly 3/24 9-strike call is the most active, with new positions opening there. 

Options Traders Target Netflix Stock Bounce

Netflix Inc (NASDAQ:NFLX) is up 7.6% at $316.24 at last glance, and at the top of the S&P 500 Index (SPX) today. A report from YipitData said the company's gross additions have improved in Canada. Plus, the streaming name has ramped up its content investments. On the charts, long-term support at the 140-day moving average kept this month's pullback in check. Plus, today's jump has NFLX moving back above its year-to-date breakeven level. 

Options traders are chiming in on today's bounce, with 205,000 calls and 193,000 puts exchanged so far -- double the intraday average amount. The weekly 3/24 320-strike call is the most active, with new positions being opened there. 

Selling premium is a popular trading strategy that involves selling options contracts to other investors. Traders and investors can generate income for their long-term portfolios using strategies like the covered call and cash-secured put. 

In today's market, selling premium has become an increasingly important strategy for traders and investors alike, allowing them to take advantage of market conditions and generate returns in various market types.

What Does Selling Premium Mean?

Selling premium is attractive to investors since they can benefit from the volatility risk premium (VRP). The implied volatility (IV) of stocks is generally overstated, meaning there is a premium for options buyers. Options are commonly used to hedge portfolios similar to an insurance plan. Therefore, premium sellers effectively turn themselves into stock insurance companies. 

One way that investors can profit from selling premium is by using cash-secured puts. This involves selling a put option and receiving a premium from the buyer. If the stock price remains above the strike price of the put option, the writer of the option keeps the premium as profit. Conversely, if the stock price falls below the strike price, the writer is obligated to buy the stock at the strike price, turning the trade into a stock investment. 

Another way that investors can profit from selling premium is by using covered calls. In this strategy, the investor owns shares of a stock and sells call options to other investors in exchange for a premium. If the stock price remains below the strike price of the call option, the writer of the option keeps the premium as profit. If the stock price rises above the strike price, the writer is obligated to sell the stock at the strike price, allowing the investor to sell their shares at a profit while still collecting a premium. 

While selling premium can be a profitable strategy, it also comes with certain risks. For example, selling options contracts that are not fully covered by cash or shares can result in potentially unlimited losses.

How Do Interest Rate Hikes Affect the Options Market?

When interest rates rise, call options increase in value while put options decrease. While interest rates may slightly affect option pricing, it doesn’t generally change the strategies utilized to sell premium. 

However, it’s important to keep an eye on the risk-free rate as an options trader to take advantage of buying bonds in a margin account. Many brokers only require a 10% margin requirement or less for bonds, allowing options traders to utilize 90% of their buying power to trade options while making money at the risk-free rate. Investing your money at the risk-free rate and stacking options strategies on top is a great way to maximize your profit potential. 

How Does IV Affects Option Premiums?

Implied volatility can have a significant impact on option prices and premiums. When IV is high, option prices and premiums tend to be more expensive, as investors are willing to pay more to protect themselves against potential price swings. Conversely, when IV is low, option prices and premiums tend to be lower, as investors are less concerned about potential price swings.

High IV is ideal for option selling strategies since it allows them to collect more premium due to the elevated option prices. However, high IV can always go higher, so risk management is crucial when selling options. Traders often watch the Cboe Market Volatility Index (VIX) to determine the level of volatility in the overall market. 

When IV is high, investors are generally fearful in the markets, causing more people to buy options to hedge their portfolios. When people are panicking to hedge their portfolios, option prices increase, allowing option sellers to collect more premium.  

What Are the Best Strategies to Sell Premium in Today’s Market?

There are several option strategies to sell premium, but some common ones include covered calls, cash-secured put, and iron condors. These strategies will outperform the buy-and-hold strategy in down and sideways markets and come with less volatility. 

Cash-Secured Puts

The cash-secured put strategy is a bullish trade that involves collecting a premium from selling a put option and setting aside enough cash to buy the stock at the strike price. If the stock decreases after you sell a put, the worst case scenario is you get assigned 100 shares of the stock at the strike price. 

For example, if a stock trades at $100 and you believe it will stay above $100 or increase, you can sell a $90 strike cash-secured put and collect a premium. This trade requires you to set aside $9,000 in case the contract gets exercised, and you must buy 100 shares at $90 each. If the stock stays above $100 by expiration, you will keep the premium as income.

Covered Calls

If you own 100 shares of a stock, you can sell covered calls to generate income and hedge your downside risk. The covered call strategy involves selling a call option to collect a premium and taking on the obligation to sell your 100 shares if it exceeds the strike price. 

The covered call is also a great hedge since the call will generate profit when the stock price falls. For example, if you own 100 shares of a stock at $100 per share, you can sell a $120 strike covered call to collect a premium. If the stock stays below your strike price, the call will generate a profit even if the stock moves up slightly thanks to theta decay. 

Iron Condors

The iron condor is a neutral options trading strategy that profits when the underlying stock trades within a small range. The iron condor is a 4-leg options strategy constructed by selling a put credit spread and a call credit spread within the same order. 

The iron condor is an excellent strategy to trade if you believe stocks will trade sideways and volatility will not increase. As your options near expiration, they will lose value due to time decay allowing traders to generate profit using the iron condor in flat markets.