The major market indices deepened their losses on Friday, sending the S&P 500 Index to its third consecutive weekly loss, shedding 0.86% on the week. Given last week’s heavy selling, it should come as no surprise that the CBOE put/call volume ratio spiked to a three-month high of 0.8 on the day. The 10-day moving average hit a one-month high of 0.66.
As we look for a little market insight, we turn our eyes to some of the most active stocks in the options pits — namely, Oracle Corporation (NYSE:ORCL), Tesla Motors Inc. (NASDAQ:TSLA), and General Electric Company (NYSE:GE).
Oracle Corporation (ORCL)
Options traders snapped up Oracle calls on Friday, as investors looked to position themselves ahead of the company’s third-quarter earnings report — slated for release after the close tomorrow night. Currently, Wall Street is looking for a profit of 69 cents per share from Oracle, with revenue expected to rise nearly 2% to $9.47 billion. EarningsWhisper.com places the Oracle’s third-quarter whisper number at a penny shy of the consensus.
Despite the note of concern in Oracle’s whisper number, options traders favored calls, with 53% of the 117,229 contracts trading on ORCL stock crossing on the call side. Among front-month options, the March $44 call strike is the most popular, with open interest of 18,194 contracts, followed closely by the March $42 put, with 18,081 contracts. Both strikes are currently out of the money, with the March $42 put falling out of the money following Friday’s nearly 2% gain by ORCL stock.
Tesla Motors Inc. (TSLA)
Shares of Tesla stock fell on Friday, as traders reacted to a bearish note from Deutsche Bank. According to analysts at Deutsche Bank, Tesla’s near-term earnings could be negatively impacted by exposure to the plunging euro, which affects roughly 30% of Tesla’s global sales. While Deutsche Bank has yet to change its long-term stance on TSLA stock, the brokerage firm lowered its 2015 earnings target to 11 cents per share, and cut its 2016 target to $1.75 per share.
Options traders took the note to heart, with 60% of Friday’s volume of 123,751 contracts trading on the put side. Overall, activity in the options pits has grown more negative toward TSLA since the beginning of March. After falling for three months straight, TSLA’s front-month put/call open interest ratio has begun to move higher in recent weeks, rebounding from a low 0.92 at the beginning of March to its current perch at 1.05.
A breach of support near $185 could accelerate the rise of put open interest, but TSLA appears to be recovering this morning, with the shares up more than 2% in per-market trading.
General Electric Company (GE)
Blue-chip conglomerate General Electric announced late last week that it will sell its Australian and New Zealand financial services business for $6.3 billion to KKR, Deutsche Bank and Värde Partners. The move comes as a part of CEO Jeff Immelt’s reshaping and streamlining of the company’s holdings. That said, news of the sale was unable to inspire GE traders, as the stock shed 1.4% on Friday to trade near support at $25.
Options traders, meanwhile, were hopeful of a bounce for GE stock. Some 74% of Friday’s 110,735 contracts in volume traded on the call side. Taking a closer look at GE’s March options, peak open interest totals 55,573 contracts at the overhead March $26 call strike, followed by 44,341 contracts and 41,209 contracts at the March $25 call and March $27 call strikes, respectively.
GE stock is currently short-term oversold, and the stock appears to be rebounding in pre-market trading this morning.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
