Stocks traded mixed on Tuesday, as traders digested a wealth of fresh earnings data. Both the Dow Jones Industrial Average and the S&P 500 ended the day lower, while the tech-heavy Nasdaq Composite rose on the session. The mixed trading day saw a touch of caution gain hold in the options pits, with the CBOE’s put/call volume ratio rebounding to 0.64. The 10-day moving average edged higher to 0.62.
Earnings-driven options activity continued to dominate the landscape for short-term traders, with Yahoo! Inc. (NASDAQ:YHOO) and CSX Corporation (NYSE:CSX) attracting considerable attention in the wake of their quarterly reports. Elsewhere, Gilead Sciences, Inc. (NASDAQ:GILD) drew speculation in the wake of a suggestion that the company should acquire Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX).
Yahoo! Inc. (YHOO)
Yahoo shares dipped sharply in after hours trading last night, as investors expressed displeasure with the company’s lackluster first-quarter earnings report. However, sentiment turned positive by premarket, encouraged that YHOO is exploring ways to boost value in Yahoo Japan.
The company posted a profit of just 15 cents per share, well short of expectations for 18 cents per share from the consensus. Gross revenue, meanwhile, rose 8.2% to $1.04 billion, just shy of Wall Street’s target for $1.05 billion. Yahoo blamed traffic acquisition costs for the lower bottom-line figure.
Calls were popular among YHOO stock options traders heading into the report, with 68% of the 135,694 contracts crossing on the call side. Peak weekly April 24 series open interest currently lies at the $45 call strike, totaling 9,447 contracts. However, these calls might be the smart money now that YHOO stock has recovered.
CSX Corporation (CSX)
Shares of railroad concern CSX have been on a tear since the company posted strong first-quarter earnings results late last week, and options traders are piling on in the aftermath. According to data from OptionsMonster, CSX has been targeted twice by bull runs on call options, with the most recent including 27,000 May $34 calls that were purchased between 41 cents and 90 cents and 10,500 May $35 calls that were purchased between 18 cents and 46 cents.
On Tuesday, calls were once again the investment vehicle of choice, with 76% of the days’ 125,050 contracts in volume trading on the call side. Peak call open interest currently resides at the overhead June $36 strike, totaling 36,442 contracts, while the in-the-money May $34 strike arrives at a close second, with open interest of 22,688 contracts.
CSX is trading marginally higher in premarket trading this morning.
Gilead Science, Inc. (GILD)
Always ready to be on the leading edge of speculative merger deals, options traders flooded Gilead Science with call options on Tuesday. Driven by an analyst comment that Gilead should acquire Vertex Pharmaceuticals, traders pushed GILD stock 4.5% higher on the day. As a result, 72% of GILD’s 163,756 contracts in volume traded as call options.
Traders are currently focused on the out-of-the-money weekly April 24 series $108 strike, where 15,103 contracts reside, while another 8,857 contracts are open at the in-the-money April $104 strike. Turning to the May series, peak call open interest totals a hefty 44,162 contracts at the out-of-the-money $110 strike.
In premarket trading, GILD stock was off slightly, slipping 0.46%.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
