Despite a weak start due to the long-holiday weekend, the major market indices rallied four out of five days last week to log their second straight week of gains. Heading into Friday’s close, options activity was mostly bullish, with the CBOE’s put/call volume ratio dipping to 0.54 — a one-week low for the ratio. The 10-day moving average held at 0.64.
Among the day’s most active stocks in the options pits were Netflix Inc. (NASDAQ:NFLX), Apple Inc. (NASDAQ:AAPL) and AbbVie Inc (NYSE:ABBV).
Netflix Inc. (NFLX)
Shares of online video streaming service Netflix rallied nearly 3.5% on Friday as investors cheered an upgrade and target-price increase from analysts at Citibank. The brokerage firm lifted NFLX stock to “buy” from “neutral” and boosted its price target to $525 from $439 per share. Citibank cited strong potential subscriber growth due to new Netflix original series such as Unbreakable Kimmy Schmidt and Daredevil.
While options activity was brisk enough to push NFLX onto Friday’s most active lists, traders were not as enthusiastic as Citibank’s analysts. On the day, volume totaled 132,295 contracts, of which just 55% traded on the call side. Overall, near-term peak call open interest totals 3,851 contracts at the April $450 strike, while another 3,072 contracts are open at the April $455 strike.
Note that these options expire at the end of this week.
Apple Inc. (AAPL)
With the launch of its new iWatch, Apple garnered a slew of headlines last week — most of which were extolling the virtues and eventual market dominance of Apple’s new gadget. Analysts at Raymond James, however, were not so enthused, downgrading AAPL stock to “market perform” from “outperform” on beliefs that the initial version of the watch could fall short of expectations.
The downgrade had little impact on AAPL shares, with the stock holding firm to its recent trading range in the $127 region. AAPL is currently perched on a convergence of its 10-day, 20-day and 50-day moving averages.
Options activity for AAPL rebounded from lackluster levels on Friday. While volume has averaged below 700,000 contracts during the past week, Friday’s volume soared to 920,506 contracts; some 67% of Friday’s volume arrived on the call side. Near-term peak call open interest currently totals 147,770 contracts at the in-the-money April $125 strike, while another 134,907 contracts are open at the overhead April $130 strike.
AbbVie Inc (ABBV)
Dividend news drove options traders to pile into AbbVie calls on Friday. The stock will begin trading ex-dividend on April 31, with AbbVie paying a cash dividend of 51 cents per share on May 15. The dividend is a 40.8% increase over the prior quarter.
Options volume soared to record short-term levels for ABBV stock, with 121,427 contracts changing hands.
With an ex-dividend date on the horizon, most of Friday’s activity was centered on dividend capture strategies, pushing call volume to total 81% of all of Friday’s activity.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
