The S&P 500 and most other major market indices finished moderately lower on Monday, as traders digested a weaker euro and continued fears of a lackluster earnings season. Some of those concerns seeped into the options pits, as the CBOE’s put/call volume ratio bounced back to 0.59, even as the 10-day moving average fell to a one-month low of 0.62.
Among the day’s most active stocks in the options pits were Bank of America Corp (NYSE:BAC), Qualcomm, Inc. (NASDAQ:QCOM) and General Electric Company (NYSE:GE).
Bank of America Corp (BAC)
Bank of America has seen a flurry of options activity in recent days, as traders position themselves ahead of the company’s second-quarter earnings report, due out Wednesday. Currently, Wall Street is expecting a profit of 29 cents per share from BofA, with sales expected to fall 5.5% year-over-year to $21.5 billion.
Taking a closer look at yesterday’s options activity, more than 318,000 contracts traded on BAC on Monday. Optimism appears to be running high, as 75% of yesterday’s volume traded on the call side.
Currently, peak April open interest totals nearly 130,000 contracts at the overhead $16 strike. With implieds pricing in a potential post-earnings move of about 3.4%, a move in the right direction by BAC stock will put these options firmly in the money.
General Electric Company (GE)
Shares of blue-chip conglomerate General Electric Company have been on fire during the past couple of sessions, with news of the company’s restructuring and $30 billion sale of its real-estate unit driving bullish sentiment. GE stock gave back some of its impressive gains on Monday, with shares dipping roughly 3% in the wake of the stock’s biggest single-session move in years.
Options volume remained at record levels for GE on Monday, rising to 308,046 contracts, or more than three times the stock’s daily average. What’s more, 75% of Monday’s volume traded on the call side.
Dan Nathan of CNBC’s Options Action noticed a bullish bet on GE after digging through yesterday’s flood. Specifically, Nathan spied a Dec $26/$30 put credit spread, with the trader receiving a premium of 20 cents, or $20 per pair of contracts. This spread reaches its profit potential if GE trades between $26 and $30 when December options expire.
Qualcomm, Inc. (QCOM)
Shares of semiconductor firm Qualcomm were up sharply in early Monday trading before settling for a loss on the day. QCOM stock came under fire after activist investor Jana Partners LLC began applying pressure to the company to consider a breakup or other solutions to boost stock prices. After surging to just shy of $72, QCOM stock settled at $68.73 on Monday with a loss of 0.62%.
Options traders responded to the news by sending 112,060 contracts across the tape on QCOM stock. The activity was mixed, but had a slight bullish bias, as 55% of Monday’s volume traded on the call side. Looking out to the May series of options, we find that peak open interest currently resides at the in-the-money $70 put, totaling 19,688 contracts. On the call side, 16,117 contracts are open at the May $70 call.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
