Tuesday’s Vital Data: Microsoft Corporation (MSFT), Facebook Inc (FB) and Caterpillar Inc. (CAT)

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While the major market indices started the week flat, it didn’t stop options traders from once again piling into calls. Overall, the CBOE equity put/call open interest ratio slipped from Friday’s perch at 0.70 to 0.66 on Monday, as calls continued to gain favor amid an influx of corporate earnings reports. Apple Inc. (NASDAQ:AAPL) was the volume leader once again, with Microsoft Corporation (NASDAQ:MSFT) and Facebook Inc. (NASDAQ:FB) rounding out the top three.

Other options activity of note included heavy put volume for Caterpillar Inc. (NYSE:CAT), which saw 72% of yesterday’s contracts cross on the put side of the tape, and an influx of call activity for Advanced Micro Devices, Inc. (NYSE:AMD), where 64% of Monday’s volume traded as call contracts.

Tuesday's Vital Data: Microsoft Corporation (MSFT), Facebook Inc (FB) and Caterpillar (CAT)

Microsoft Corporation (MSFT)

Since I covered Apple options activity twice yesterday (here and here), let’s kick today’s coverage off with a look at enterprise software giant Microsoft.

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MSFT stock was trading nearly 7% lower in premarket trading today as Wall Street reacted negatively to a largely in-line second-quarter earnings report.

The company posted a profit of 71 cents per share on revenue of $26.5 billion. That said, the whisper number, according to EarningsWhisper.com, was at 73 cents per share. Cloud revenue was up sharply, but contracting demand for Windows OS (sales were down 13% on an annual basis) and related hardware created concern for traders in after-hours activity.

Heading into the report, options activity was skewed toward the call side, which attracted 59% of the vote. The most MSFT stock active call strike was the out-of-the-money Feb $47 strike, which saw 7,554 contracts change hands.

The most active put, meanwhile, was MSFT’s weekly Jan. 30 $46 strike, which saw volume of 2,931 contracts. If MSFT’s after-hours plunge to $45 carries over into the open, the weekly Jan $46 put, which was asked at 45 cents at the close, would be sitting one point in the money with a potential profit of 55 cents, or $55 per contract.

Facebook Inc (FB)

Some 68% of Facebook stock options activity traded on the call side on Monday, hinting at bullish aspiration for FB stock traders. The company is slated to release its fourth-quarter earnings report after the close Wednesday, with Wall Street expecting a profit of 25 cents per share on revenue of $3.78 billion.

Drilling down on FB stock options data, weekly Jan. 30 implieds are pricing in a potential-post earnings move of about 6.4%. In other words, short-term options data points to a potential rally to $82.43, or a plunge to $72.57 for FB stock in the wake of Wednesday’s report.

Options traders appear to be expecting a sharp short-term bullish move for FB stock, as most of yesterday’s options volume was focused at out of the money strikes in the weekly Jan. 30 series of options. Technical resistance lies at $80, but a breakout could see follow-through buying send FB shares into fresh all-time high territory.

Caterpillar Inc. (CAT)

With earnings set for bring and early this morning, Caterpillar was a whipping boy for put trading during Monday’s session. As I noted on Friday, earnings expectations are extremely low for the company, with analysts expecting a significant negative impact from plunging oil prices. Options traders appear to be siding with the bears ahead of the report, as only 28% of Monday’s volume was call oriented.

Peak put volume took place at the out-of the-money 83 strike in the weekly Jan. 30 series, with 7,981 contracts trading on open interest of just 551 contracts. With volume outstripping open interest at this strike, it’s a safe bet that much of this activity was the initiation of new positions — though it’s impossible to determine whether they were bought or sold.

Technically, CAT stock has struggled lately. The shares are rebounding from oversold levels, with short-term support at $83, and longer-term support at $80.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/01/tuesdays-vital-data-microsoft-corporation-msft-facebook-inc-fb-and-caterpillar-cat/.

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