The pendulum swung back toward the red on Tuesday as stocks posted broad losses, pushing the major market indices into the red for the week. The Nasdaq led the way lower with a loss of 1.55%, while the S&P 500 shed 1.18% on the day. Once again, options traders were reactionary, sending the CBOE put/call volume ratio surging off Monday’s multiweek low to a one-week high of 0.74. The 10-day moving average edged higher to 0.64.
Drilling down on yesterday’s most active stocks, perennial favorite Apple Inc. (NASDAQ:AAPL) once again heads up the list, though traders may have some cause for concern going forward as the FTC looks into potential monopolistic activity and antitrust violations. Meanwhile, Alibaba Group Holding Ltd (NASDAQ:BABA) drew call activity ahead of its earnings report, while puts were popular on oil and gas concern Chesapeake Energy Corporation (NYSE:CHK) ahead of its quarterly report.
Apple Inc. (AAPL)
Apple shares took a 2.25% hit amid yesterday’s selloff, but that didn’t slow AAPL stock options traders. AAPL saw 955,116 contracts trade yesterday, with 67% of Tuesday’s volume trading on the call side. The weekly May 8 series are quite popular at the moment, with AAPL’s out-of-the-money May $130 strike home to peak near-term open interest of 34,411 contracts. Another 20,000-plus contracts are also open at the further out-of-the-money May $121 and $135 strikes.
There have been plenty of headlines in the financial media declaring that AAPL stock is on the verge of a considerable breakout to the upside, but the company may have some turbulence coming down the pike. Specifically, Apple’s current tactics surrounding the relaunch of the Beats music service has drawn the attention of the Federal Trade Commission, which is investigating Apple’s business for antitrust violations.
After breaking below all of its major short-term moving averages on Tuesday, AAPL stock is edging higher in premarket trading this morning.
Alibaba Group Holding Ltd (BABA)
With the stock trading down more than 30% since November, Alibaba Group has something to prove to investors when it steps into the earnings confessional ahead of the open tomorrow morning. Analysts are expecting a profit of 43 cents per share (whispers place earnings at 47 cents per share) on revenue of $2.78 billion, but stockholders will be paying closer attention to guidance and any updates on the company’s hiring freeze.
Options traders appear to be favoring calls heading into the event. Some 274,500 contracts traded on BABA stock on Tuesday, with 56% of this volume trading on the call side. Looking at BABA’s weekly May 8 series open interest configuration, call traders are focusing on the overhead $85 strike, which is home to 18,837 contracts, while put traders have zeroed in on the in-the-money $80 strike, where 8,869 contracts reside.
BABA stock is fractionally higher in premarket trading, though the shares may have a fight to reclaim round-number support in the $80 region.
Chesapeake Energy Corporation (CHK)
Chesapeake Energy stock has been beaten around during the past several months, as Wall Street pushished the oil and gas concern for falling oil and gas prices. CHK stock has recently shown signs of life, however, with the shares breaking out above short-term resistance in the $16 region.
CHK is looking to extend those gains today, with the shares up 2.46% in premarket trading after the company posted better-than-expected quarterly earnings. For the record, Chesapeake Energy earnings came in at 11 cents per share on revenue of $2.76 billion. Analysts were expecting earnings of 4 cents per share and revenue of $3.68 billion.
Options traders were decidedly put heavy heading into the report. Total volume came in at 171,805 contracts, with 74% of that activity crossing on the put side.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
