It was a historic and technical breakthrough in Thursday’s session for a couple major indices. Follow-through on “we’re good with that” Fedspeak sent the S&P 500 jumping decisively above its 50-day simple moving average and adding 1.04% in a mostly untroubled and trendy session.
The champagne was bubbling over on bulls in the Nasdaq Composite as well. The slightly less tech-heavy index (these days) finally reclaimed and nudged above its dot-com bubble high while leading the overall market higher by 1.34%.
Behind Thursday’s impressive rally, traders bought further into the Fed wearing kids gloves when it does finally pull the trigger on a first rate hike after essentially promising to maintain a very accommodative, pro-Wall Street program. There was a brief interlude with profit-taking best viewed on the intraday chart when the latest impasse in Greece debt negotiations hit the newswire.
Equity options activity Thursday retained its modestly bullish stance as the CBOE total put/call ratio stood pat at 0.89 and unchanged from Wednesday. Volume, on the other hand, in listed equity calls and puts picked up handily to 17.70 million contracts and well above June’s 12.9 million average.
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Oracle Corporation
It certainly didn’t seem like old times for Oracle on Thursday. Shares of ORCL fell nearly 5% after a disappointing earnings report that featured both top- and bottom-line misses and some finger-pointing at a strong U.S dollar.
Volume grew to more than nine times the daily average in Oracle’s options. The ending tally of 271,000 contracts saw fairly split activity between its calls and puts. Most active and by a decent margin, the Jun 26 $42 call traded a bit more than 19,000 contracts.
The ORCL weeklies call closed at 98 cents mid-market. With shares of ORCL at $42.68 and six trading days to expiration, the call maintains less than 2.5% stock risk, but also holds volatile intrinsic value of roughly two-thirds its total cost.
Bank of America
Bank of America appeared to be behind bars Thursday as shares of BAC managed a scant penny gain to $17.38 — small compared to the Financial SPDR’s (NYSEARCA:XLF) 0.93% performance. Option activity, however, was busy enough to register about 275,000 contracts and put BAC into the No. 2 spot for total options traded.
In front of Friday’s expiration, a good portion of the trading was in the expiring June contract but there was some concentrated action in the Aug $17 call which finished at 80 cents. Volume of around 39,500 compares to a much larger open interest of 192,000.
Gilead Sciences
Finally, while Oracle certainly didn’t help the NASDAQ Thursday, biotech was a major support. The Market Vectors Biotech ETF (NYSEARCA:BBH) finished up 3.16%. One influential name which also saw decent activity on the options side was Gilead Sciences.
With GILD up about 2% and continuing to hit its own all-time highs for a third time this week, option trading increased to roughly twice normal on 104,000 contracts, with 70% of the action represented in the calls.
Outside of the June contract, the July $120 and $125 calls and July $115 and $120 put were busy. However, top honors and fresh positioning, as volume easily trumped open interest, went to the July $130 call. Roughly 9,500 calls traded before closing at 39 cents which are about 7% out-of-the-money with four trading weeks to go.
Disclosure: As of this publishing, investment accounts under Christopher Tyler’s management do not maintain positions in any of the securities or their derivatives mentioned. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
