Thursday saw a slight bullish bias for the major market indices, with the Nasdaq Composite leading the way with a gain of 0.4% to finish at a record close of 5,056.06, while the S&P 500 rose 0.24%. On the day, a string of strong earnings reports and better-than-expected jobless claims were offset of a larger-than-expected decline in the U.S. Purchasing Managers Index. Options traders picked up on the trepidation, as the CBOE’s put/call volume ratio jumped to a one week high of 0.66. The 10-day moving average held at 0.62.
AT&T Inc. (NYSE:T) impressed investors with strong subscriber growth and better-than-expected first-quarter earnings, while General Motors Company (NYSE:GM) was beaten lower following a dismal quarterly performance. Finally, Amazon.com, Inc. (NASDAQ:AMZN) attracted record short-term options volume ahead of its first-quarter earnings report.
Amazon.com, Inc. (AMZN)
With Amazon’s first-quarter report slated for after the close last night, options speculators appeared somewhat divided. Volume totaled 171,558 contracts, with only about 55% of that volume crossing on the call side. The weekly April 24 series $420 strike was the target for many traders, with open interest swelling to 4,440 contracts. The deep out-of-the-money April $450 and $460 strikes were also targeted, with open interest totaling more than 3,000 contracts at each.
In after-hours trading Thursday, AMZN stock soared more than 9%, making yesterday’s call activity out to be smart money. It looks even better when you consider that Amazon is up 12% in Friday’s premarket activity.
Amazon posted a loss of 12 cents per share for the quarter, edging past Wall Street’s target for a loss of 13 cents per share. Revenue was considerably better, however, jumping 15% to $22.72 billion and quelling many concerns about Amazon’s slowing growth.
The real bright spot for AMZN traders was the company’s Web Services unit, which saw sales soar 49% year-over-year to $1.57 billion on operating income of $265 billion.
AT&T Inc. (T)
Shares of communications giant AT&T rallied more than 4% on Thursday, as investors took heart in the company’s strong first-quarter earnings report. AT&T reported earnings of 63 cents per share, a penny ahead of the consensus estimate, while revenue came in at $32.5 billion. Wireless subscriber growth was a bright point for AT&T, with the firm adding 1.2 million subscribers during the quarter. AT&T also said it expects to close its acquisition of Direct TV (NASDAQ:DTV) during the second quarter.
On the day, T stock saw volume of 289,243 options contracts, with 59% of the activity trading as calls. In the weekly April 24 series of options, traders zeroed in on the now in-the-money $34 strike, with open interest of 20,577 contracts. The deeper in-the-money April $24 series also saw considerable attention, sporting open interest of 16,838 contracts. The April $24 series options expire at the close of trading today.
In premarket trading, T stock was up slightly, looking to extend yesterday’s rally.
General Motors Company (GM)
GM traders had a fight on their hands yesterday, as the stock fell 3.34% to trade at its lowest point since early February. The U.S. automaker reported significant growth in earnings, which came in at 86 cents per share, but the figure whiffed Wall Street’s target for 96 cents per share. Revenue was also light, arriving at $35.7 billion versus the consensus estimate for $37.61 billion. There were a few bright spots, however, as pickups and SUV sales were strong stateside, leading GM to earn $2.18 billion in North America.
Picking up on a potential overreaction by the broader market, GM options traders piled into calls on Thursday. Volume totaled 129,097 contracts for GM stock, with 70% of that activity crossing as call options. Looking out to May monthly contracts, peak GM call open interest resides at the just overhead $36 strike, where 9,683 contracts currently reside. Adding a bit of speculation to the backdrop, more than 7,700 contracts are open at each of the $37 and $38 May call strikes, while another 5,099 contracts call the May $40 call strike home.
Heading into the open, GM stock has a slight positive bias, trading up at $35.95 at last check.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
