The major market indices dropped sharply across the board Monday, with the Nasdaq shedding nearly 1% on the day and the Dow Jones Industrial Average turning negative for 2015. Greek debt talks were the catalyst for the weak start to the week, with a potential rate hike from the Fed looming in the background to make Wall Street even more nervous.
Options traders largely held their cool, however, with the CBOE put/call volume ratio holding at 0.61 as volume returned to normal. The 10-day moving average also came in at 0.61.
In equity news, MannKind Corporation (NASDAQ:MNKD) shares surged more than 18% on Monday following a “buy” rating reiteration and hopes that the third-quarter marketing plan will jump-start sales. JPMorgan Chase & Co. (NYSE:JPM) drew heavy call volume on a down day for the stock on the heels of reports that a $9 billion acquisition is in the works. Finally, Delta Air Lines, Inc. (NYSE:DAL) shares plunged after an analyst at Raymond James downgraded the stock on short-term growth concerns.
We’ll take a closer look at the action in MNKD, JPM and DAL below.
JPMorgan Chase & Co. (JPM)
JPM stock backed away from multiyear highs on Monday as Greek debt Fed rate hike concerns pressured the broader market. The stock was also dinged following a Sunday Times report that JPMorgan is in early talks to buy Worldpay for $9 billion.
Options traders looked to take advantage of the weakness, sending 133,634 contracts across the tape on JPM. Furthermore, 87% of Monday’s activity was of the call variety. On the weekly option front, the in-the-money June 12 $66.50 strike is home to peak call open interest of 2,560 contracts. The real focus for short-term JPM options traders, however, lies at the monthly June $67.50 call strike, where some 18,500 contracts are currently open.
MannKind Corporation (MNKD)
Speculation is the name of the game when it comes to biotechnology firm MannKind, especially when the company has a potential blockbuster insulin drug just waiting to break out. Jefferies reminded MNKD investors of the stock’s potential on Monday, reiterating a “buy” rating on the shares. MNKD stockholders are looking ahead to the third quarter with hopeful excitement, as MannKind ramps up its marketing push for Afrezza.
That little nudge from Jefferies was all it took to send MNKD stock soaring more than 18% on Monday, and options traders appeared to chase the rally. Overall, a short-term record 147,049 contracts traded on MNKD, with 81% of the day’s volume crossing on the call side. Options traders are currently heavily focused on the June $10 strike, where 56,919 calls and 56,989 puts are currently open.
Delta Air Lines, Inc. (DAL)
DAL stock hit a spot of turbulence on Monday, after Raymond James analyst Savanthi Syth downgraded DAL to “outperform” from “strong buy.” Savanthi also lowered her price target to $53 from $60, and said she expects cuts to Delta’s outlook for the second half of 2015 and a weaker balance sheet for the company.
DAL stock dropped more than 5% following the downgrade, sending the shares to their lowest point of the year. DAL options traders appeared to remain optimistic, however, with calls eating up 79% of Monday’s volume of 116,374 contracts. Looking at weekly June 12 series options for DAL reveals rather heavy call open interest at the out-of-the-money $46 strike, totaling 20,038 contracts. The next most popular strike, in terms of OI, is the out-of-the-money weekly June $45 strike, where 5,217 contracts are currently open.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
