Concerns about a Federal Reserve rate hike reared their ugly heads once again on Friday, sending the major market indices into negative territory for the week. However, the S&P 500 still managed to post a positive May, ending up 1.1% for the month. Options activity remained volatile on Friday, with the CBOE put/call volume ratio dropping to within reach of a multiweek low of 0.57 after tagging 0.71 on Thursday. The 10-day moving held at 0.63.
Turning to Friday’s most active options, a report on prime-time Internet traffic proclaimed Netflix, Inc.’s (NASDAQ:NFLX) dominance of the virtual airwaves, while Intel Corporation (NASDAQ:INTC) was targeted with speculation surrounding a potential acquisition of Altera Corporation (NASDAQ:ALTR). Finally, Pfizer Inc. (NYSE:PFE) puts were quite popular despite the company winning FDA approval for Rapamune to treat a rare degenerative lung disorder.
Netflix Inc. (NFLX)
While Netflix reassembling most of the original cast of Full House for a reboot certainly provided some lift for NFLX stock (how could it not?), a report that Netflix streamers use 36.5% of prime-time Internet bandwidth in North America did most of the heavy lifting on Friday. According to Sandvine, a Canadian bandwidth-management system, Netflix streaming has broken its own record for prime-time traffic, underscoring the sheer dominance of the company’s streaming services.
Also of note for NFLX stock traders is the fact that the number of NFLX shares sold short plunged by 24% during the most recent reporting period. Despite the sharp decline, however, some 4.66 million shares of NFLX stock remain sold short, accounting for 7.8% of the stock’s total float.
Despite the exciting Full House news, Friday’s options activity was heavy but mixed on NFLX stock. Overall, 117,211 contracts traded on the stock, with only about 53% of Friday’s volume trading as call contracts.
Drilling down on weekly June 5 series options, speculators appear to be looking for a breakout. Currently, the $625, $630, $640 and $650 call strikes all sport open interest in excess of 1,100 contracts.
Intel Corporation (INTC)
More details have emerged over the weekend, but rumors of an official Intel bid for Altera began to swirl Friday morning on Wall Street. According to reports, Intel is expected to announce a $17 billion bid for Altera later today. A deal would mark a continuation of consolidation within the semiconductor market. While reports caution that the deal could still fall apart, indications are that Altera stockholders could receive about $54 per share for ALTR stock. The acquisition would be the largest in Intel’s history.
Weekly June 5 series options activity was brisk on Friday, with most of the day’s activity trending bullish in nature. Overall, some 137,086 contracts traded on INTC stock, as 70% of the day’s volume traded on the call side.
Peak June 5 series call activity is currently focused at the at-the-money $34.50 strike, totaling 8,935 contracts. Another 6,700 are open at the overhead $35 strike. Meanwhile, peak put open interest, and peak June 5 series total open interest, of 9,223 contracts resides at the out-of-the-money $32 put.
Pfizer Inc. (PFE)
Shares of pharmaceutical giant Pfizer bucked the downtrend on Friday as the company won FDA approval for Rapamune to treat rare degenerative lung disorder lymphangioleiomyomatosis (LAM). Rapamune was already approved as an immunosuppressant to help with organ transplant rejection, and the new indication gives Pfizer seven years of exclusivity for the treatment.
Despite the stock’s rally and the FDA news, options traders were heavily put-focused on PFE on Friday. Some 210,000 contracts traded on PFE on the day, but only 35% of those traded on the call side. In the weekly June 5 series, call traders have zeroed in on the $35 strike, where 4,885 contracts currently reside, while put traders are focused on the $34 strike, with open interest totaling 3,102 contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
