The business of volatility

Many traders like to focus on price action, treating one stock very much like any other, but there are good reasons for even short-term players to thoroughly understand the companies they trade.

Virtu Financial (VIRT) kicked off this week with heavier-than-average call options activity, concentrated in the roughly at-the-money August $60 calls that expire at the end of the week. Around midday, 1,200 contracts had traded:

But as the chart shows, volume was even heavier on Friday, when 2,100 contracts traded—which was the contract’s open interest (OI) total on Monday. That suggests a large position was initiated last Friday. It will be necessary to wait for today’s (Tuesday’s) OI total to know whether this position was being expanded (if OI is higher) or at least partially liquidated (if OI is lower).

The $60 calls also jumped in value over these two days, rallying from a close of $0.36 last Thursday to $1.40 on Friday, then trading as high as $2.60 on Monday before pulling back to close near the bottom of the day’s range.

The chart below shows the options’ bounce was reflected in a strong upswing in VIRT shares, which climbed nearly 5% on Friday and is still up 8% over the past four days, flipping the $60 calls from being roughly $5 out of the money to as much as $1.34 in the money before the Monday reversal. This move followed the stock closing (on August 11) more than 17% below its July record close:  

VIRT’s monthly chart—which spans the stock’s entire trading history—shows the stock’s year-to-date rally into its July high was it strongest dollar up move ($34.70) of a similar length in its history, although on a percentage basis it was smaller than the 163% rally from January 2024 to July 2025:

All this price action provides context for the recent options activity, which could be interpreted by some traders as bullish, since traders typically use calls to take long (rather than short) positions in the underlying stock. Regular readers of this space know that’s only one way to look at any trade, since 1) for any buyer there’s a seller who may have the opposite opinion, and 2) confirming whether traders were getting in or out of the market can only happen by consulting the next day’s OI.

Aside from the price-action considerations, VIRT’s fundamentals are a potentially key part of this story. As a “high-frequency” market maker, VIRT is in the business of providing liquidity to financial markets. They make much of their money by “capturing the spread” in markets—that is, the difference between the bid and ask prices. Although that may only be, say, a fraction of a cent in a particular stock, it can add up to a lot of money when the firm makes several million trades a day, which VIRT does.

When spreads are wider, of course, potential profits can increase—which is to say a company like VIRT may be more profitable during volatile market periods than stable ones, since bid-ask spreads tend to be wider in the former condition. Morgan Stanley & Co. analysts made this point when outlining their Underweight rating on VIRT. In addition to the stock’s “volatile earnings profile,” they note that the elevated volatility the company has benefited from could subside if the macro backdrop clarifies, thus dampening market-making revenue.

While it’s impossible to know whether that macro clarification and volatility de-escalation will occur, understanding what a company does, and when it may or may not flourish, can shed some light on why traders may be getting in or out of the market at a given time.

Today’s numbers include: Housing Starts and Permits (8:30 a.m.), Import and Export Prices (8:30 a.m.)., Industrial Production and Capacity Utilization (9:15 a.m.), Pending Home Sales Index (10 a.m.), E-Commerce Retail Sales (10 a.m.).

Today’s earnings include: Dycom (DY), Home Depot (HD), Keysight Technologies, (KEYS), Sony (SONY), Sociedad Quimica Y Minera De Chile (SQM), Toll Brothers (TOL).

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¹ MorganStanley.com. Virtu Financial Inc: Overview. 8/17/26.