Barring a bounce today, stocks are poised to end their fourth week out of the past five in negative territory. While selling wasn’t steep, the major market indices dropped about a half-percent across the board, with the S&P 500 splitting the difference with a loss of 0.57%.
Options volume remains brisk heading into the weekend, with the single-session CBOE equity put/call volume ratio rebounding to a one-week high of 0.78, while the 10-day moving average rose to 0.64.
In equity news, Amazon.com, Inc. (NASDAQ:AMZN) drew a healthy degree of call volume ahead of the company’s second-quarter earnings report (which turned out to be a bullish blowout). On the other hand, volume on Freeport-McMoRan Inc (NYSE:FCX) was put heavy ahead of the company’s rather disappointing second-quarter report. Finally, Chesapeake Energy Corporation (NYSE:CHK) has been the target of much ire from the options pits this week after the company dropped its quarterly dividend on common shares entirely.
Amazon.com, Inc. (AMZN)
Amazon has a history of being the company that reports strong sales growth, but weak earnings growth due to heavy spending on products and services (the Kindle, Amazon Music, Prime, etc.). Which is why it was such a surprise to investors that Amazon posted a better-than-expected second-quarter profit of 19 cents per share on revenue of $23.18 billion. Wall Street was expecting 12 cents per share on $22.4 billion in revenue.
As a result, AMZN stock has surged more than 20% higher in premarket trading, indicating that yesterday’s flood of call volume was definitely smart money. On the day, volume grew to 207,789 contracts for AMZN, with calls making up 61% of the take.
Looking ahead to weekly July 31 series options, peak call open interest currently totals 3,338 contracts at the $550 strike. With AMZN trading closer to $575 heading into the open, these contracts are now solidly in the money.
Freeport McMoRan Inc (FCX)
FCX stock fell more than 9% on Thursday, after the company confirmed investor fears by posting weaker-than-expected second-quarter numbers. Earnings came in at 14 cents per share on $4.25 billion in revenue. Earnings were mostly in line with expectations, but revenue fell short of the $4.28 billion analysts were expecting.
FCX stock traders new the situation was bad, but confirmation drove heavy put activity on Thursday. Overall, 225,106 contracts traded on FCX, with puts accounting for a hefty 74% of the day’s volume. Surprisingly, however, calls remain the most popular contract for FCX. Currently, the stock’s total put/call open interest ratio rests at 0.45, with calls more than doubling puts on the equity.
Chesapeake Energy Corporation (CHK)
No more dividend capture plays for Chesapeake Energy common stock. That’s because the company finally ditched the quarterly dividend to save about $240 million a year — a move that many CHK watchers have been expecting for a while. In addition, Credit Suisse downgraded CHK stock to “neutral” from “outperform.”
Not surprisingly, put volume dominated CHK’s options activity on Thursday. Volume came in at 265,274 contracts, tagging a near-term high for the shares, while puts accounted for some 85% of the day’s activity. With a total put/call open interest ratio of 0.61, calls still hold the title of most popular (in terms of open interest), but, with the dividend gone, look for much of this activity to fade into the background.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
