The S&P 500 kicked off the trading week by following through on Friday’s 13th attempt at definitively breaking below its 50-day moving average support. The SPY finished down 0.43% for a second session below the key technical support line, but traders did manage to cut early losses by more than half.
Gnawing at traders out the gate Monday, a Friday stalemate in Greek debt negotiations turned into a full-fledged collapse between Greece and its international creditors over the weekend. The failure to reach an agreement stoked fears of Greece defaulting on its debt and exiting from the eurozone.
Equity options activity saw the effects of an unofficial three-day weekend as Monday’s volume of 11.7 million fell from Friday’s 13 million contracts, as well as below June’s 12.6 million average. At the same time, the CBOE total put/call ratio finished at 0.89, with traders finding a bit more reason to position with calls and compared to Friday’s slightly bearish reading of 1.06.
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Twitter Inc
Twitter made the No. 2 spot with options volume growing some 1.7 times above normal on 194,000 contracts with calls preferred by a bit more than a 2-to-1 margin. Shares of TWTR finished off nearly 3.5% and hit their lowest levels of 2015.
A technical breakdown below TWTR stock’s six-week trading range was assisted by a price target cut to $40 from Axiom Capital. As for the lopsided call action, the bulk of the trading was in the June and July expiration months in several surrounding money strikes, suggesting that rolling out of positions with positions otherwise set to expire this Friday was behind a good portion of the activity.
JPMorgan Chase & Co (JPM)
Banker JPMorgan saw its shares forge a market-like performance with a finish of -.38% to $67.99 and still trading just 1% below its all-time-highs set last week. News on the session was largely inconsequential, but that didn’t stop traders from leaning on the call side.
The expiring June $62.5, August $65 and December $67.5 calls were all active, with roughly 6,500 to 6,900 contracts apiece changing hands. However, an extremely one-sided put/call ratio of around 0.1 was the result of nearly 61,000 in-the-money, Sep $65 calls trading before finishing the session at $4.10.
Micron Technology, Inc.
Rounding out our top three options activity leaders, Micron was another tech name that badly lagged the broader market. Shares of MU fell by roughly 3.5% and hit fresh year-to-date lows on an analyst downgrade.
A ratings and price target cut for MU by broker Morgan Stanley held more sway with investors than some positive comments in Barron’s this past weekend and a Jeffries “buy” reiteration on upbeat Dram trends for Micron in the second half of 2015.
For their part, Morgan Stanley effectively slapped MU with a “sell” in doling out a cut from “equal weight” to “underweight” and slashing its price target on shares from $30 to $21 a share.
And for their part and in Monday’s options action, volume of about 2x its daily average saw 145,000 contracts change hands with calls outpacing puts by a margin of roughly 1.75x. Most active, the July $28 call traded just over 9,700 contracts. The well out-of-the-money call finished at 14 cents.
Call activity was also helped along by some heavy trading in the January contract. Several strikes ranging from the near-the-money $25 strike to the extremely far out-of-the-money $35 strike were in play Monday on volume of around 26,000 contracts
Disclosure: As of this publishing, investment accounts under Christopher Tyler’s management have an existing hedged position in Twitter stock and its options. 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
