“Greek Monday” saw the major market indices plunge roughly 2% across the board, as Wall Street fretted over the impact of Greece not making its scheduled 1.6 billion-euro debt payment to the International Monetary fund today. The default could also have the unsavory effect of spinning Greece out of the European Union if a last-minute deal isn’t reached.
Options bears were out in force yesterday, sending the the CBOE equity put/call volume ratio soaring to 0.94, its highest level of the year. The 10-day moving average hit a one-month high of 0.65.
In equity news, the Greek crisis pummeled financial stocks, with Oppenheimer adding to Bank of America Corp’s (NYSE:BAC) woes after trimming its price target on the banking giant. Elsewhere, shares of Facebook Inc (NASDAQ:FB) fell despite news that the company was opening a new ad sales office in Johannesburg, South Africa, in a move to monetize its 120 million African users. Finally, Cisco Systems, Inc. (NASDAQ:CSCO) was flooded with put volume after the company launched its new Internet of Things (IoT) initiative, including 15 new products.
Let’s take a closer look at the headlines and trading action in each of these stocks:
Bank of America Corp (BAC)
BAC stock fell more than 3% on Monday, outstripping losses by its peers in the Financial SPDR (NYSEACRA:XLF), which shed 2.4% on the day. Analysts at Oppenheimer didn’t do BAC any favors when the brokerage firm reiterated its “outperform” rating but cut its price target on the shares to $20 from $21. While not an extremely bearish move, all things considered, traders were looking for any excuse to sell on Monday as a way to limit exposure to the Greece fallout.
Options volume was healthy on BAC on Monday, with some 365,300 contracts changing hands on the banking concern. And, despite the negative commentary from Oppenheimer, calls accounted for 59% of BAC’s total volume yesterday.
That said, peak open interest for the weekly July 2 series of options totals 41,327 contracts at the out-of-the-money $16 strike put. On the call side, 30,950 contracts at the overhead $18 strike, with another 19,633 contracts open at the $17.50 call strike.
Facebook Inc (FB)
With the announcement of Facebook’s new ad sales office in South Africa, the company has just opened up a new front in its push toward monetizing its next wave of users. Facebook currently sports more than 120 million users in Africa, with about 80% of those connecting via mobile — the company’s bread-and-butter in terms of advertising revenue.
A combination of overbought technicals and all-time highs were bound to pressure FB stock over the short-term, but Monday’s broad market selloff exacerbated the problem, sending FB down more than 2.5% on the day. Options traders remained unperturbed, however, sending 334,918 contracts across the tape, with calls comprising 59% of that volume.
Through the end of the week, options traders have their sights set on the weekly July 2 series $92 call, with 7,059 contracts open at this out-of-the-money strike. Closer to home, meanwhile, 4,143 contracts are open at the $85 call strike, while some 4,070 put contracts also reside at the $85 strike in the weekly July 2 series.
Cisco Systems Inc. (CSCO)
Cisco Systems picked a bad day to unveil its IoT System, as the stock shed more than 2.6% despite the news. Cisco’s move into the IoT market is a bit late, but the company believes that its completely integrated system will have broad appeal.
Alongside the new IoT push, Cisco launched 15 new IoT targeted products, including IP surveillance cameras, security analytics software, IoT data services and management software, seven new 4G/WiFi-capable industrial routers, an ethernet switch designed for factory use, and a Wi-Fi access point for mass transit systems.
Maybe options traders just weren’t impressed, or maybe they were reacting to CSCO’s breach of technical support at $28, but put contracts dominated the stock’s options activity on Monday. Overall, 104,572 contracts traded on CSCO yesterday, with puts accounting for a hefty 72% of the day’s volume.
This heavy put activity shows up in CSCO’s weekly July 2 series open interest configuration, with peak open interest totaling 11,094 contracts at the in-the-money $28.50 strike. On the call side, some 3,000 contracts are open at each of the weekly July 2 series $30, $29, $28.50 and $28 strikes — all of which are currently out of the money.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
