Stocks rallied on Thursday, sending the major market indices toward annual highs on the day. Traders saw a silver lining in weak jobless claims and producer prices, speculating that the Fed would not be raising interest rates anytime soon. Options traders were not as enthusiastic, with increased put volume pushing the CBOE put/call volume ratio higher to 0.6. The 10-day moving average slipped to 0.63.
In equity news, Facebook Inc (NASDAQ:FB) was popular among call traders after JPMorgan Chase and Morgan Stanley offered up bullish commentary on the social media giant. Elsewhere, Alibaba Group Holding Ltd (NYSE:BABA) saw a return of call volume after announcing a partnership with Wal-Mart Stores, Inc. (NYSE:WMT) for its Alipay mobile payments service. Finally, the Verizon Communications Inc. (NYSE:VZ) bid for AOL Inc. (NYSE:AOL) has sparked a flood of speculation that Yahoo! Inc. (NASDAQ:YHOO) could either make a bid for AOL or become a takeover target itself.
Here’s a closer look at what’s going on with these heavily trafficked stocks:
Facebook Inc (FB)
FB shares spiked more than 3% on Thursday in the wake of bullish analyst commentary on the company. Both JPMorgan Chase and Morgan Stanley offered up favorable comments on the social media giant, with JPMorgan citing that Facebook’s core services accounted for 24% of all smartphone activity in the U.S. The figure was up 2% from reported usage in March.
Morgan Stanley, meanwhile, said that Facebook remained strong in what was a terrible quarter for online ads.
Options traders banked on the research notes, sending record volume of 596,322 contracts across the tape for FB stock. Furthermore, 73% of Thursday’s volume changed hands as call options. Looking out to June options, FB could face a showdown at the $82.50 level, which is currently home to both peak call open interest of 119,801 contracts and peak put open interest of 103,669 contracts. A break above this level could spark follow-through buying and push shares to challenge resistance near $85.
Alibaba Group Holding Ltd (BABA)
BABA stock posted minor gains yesterday as shares continue to bounce around below resistance at the $90 level — an area that has capped the stock since its recent quarterly earnings report. In the news, Alibaba announced that it has teamed up with Walmart to offer its mobile payments service Alipay in all of Walmart’s Chinese stores.
While volume was not quite spectacular for BABA, with about 173,670 contracts trading, 60% of Thursday’s activity crossed on the call side — a step up from a recent rise in puts for BABA stock. With $90 a pivotal trading level for BABA, it should come as no surprise that June options are centered heavily on this strike. Currently, the June $90 call sports open interest of 57,021 contracts, while 47,331 put contracts reside at this soon-to-be front-month strike.
Yahoo! Inc. (YHOO)
Consolidation brings speculation, and Yahoo! has drawn quite a bit of speculative headlines since news of Verison’s bid for AOL hit the Street. Yahoo! has struggled to do more than stay afloat for some time now, and many analysts believe the company needs to make a move. They just don’t agree on what move that should be. One major play is a potential buyout from Alibaba Group, an idea floated by Money Morning Chief Investment Strategist Keith Fitz-Gerald. On the other hand, an article over on Barron’s believes that, with $5.7 billion in net cash, Yahoo! could easily make a play for AOL.
Naturally, options traders are eating up the speculation, sending a short-term record 213,989 contracts across the tape for YHOO on Thursday. Activity is nearly evenly split, with 55% of yesterday’s volume trading as call options. YHOO stock traders will want to keep a close eye on the overhead $45 level, as 53,855 calls and 50,037 puts are open at this strike in the June series.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
