The major market indices went nowhere on Thursday, as strong second-quarter GDP growth was offset by a slew of disappointing corporate earnings reports. In fact, the S&P 500 finished the session almost exactly where it began.
Calls gained in popularity despite the market’s stagnation, as the CBOE’s single-session equity put/call volume ratio fell to a two-month low of 0.5. The 10-day moving average was dragged along for the ride, slipping to 0.65.
In equity news, Netflix Inc. (NASDAQ:NFLX) drew heavy call volume after signing a deal to offer content in Italy and unveiling plans for a slew of new Marvel TV content. Meanwhile, United States Steel Corporation (NYSE:X) was a surprise addition to the most actives list after JPMorgan upgraded the stock. Finally, options traders were mixed on LinkedIn Corp (NASDAQ:LNKD) prior to the company’s second-quarter report.
Netflix, Inc. (NFLX)
Netflix took yet another step toward its goal of dominating the world’s online streaming needs on Thursday. The company announced a content sharing deal with Telecom Italia (TI), though financial details and specific content details were not disclosed. Additionally, Netflix told a Television Critics Association panel meeting that it would be releasing a new Marvel superhero series every six months.
Options activity ramped up on NFLX stock following the reports. Overall, some 203,000 contracts traded on NFLX, with calls accounting for 61% of the day’s activity. The weekly July 31 series saw the bulk of Thursday’s volume, which should come as no surprise with the contracts expiring at the end of trading today.
Taking a closer look, the July $109 strike was particularly interesting, with 1,602 contracts trading on open interest of 1,514 contracts. With volume exceeding open interest, it suggests the initiation of fresh contracts on this out-of-the-money strike that expires with today’s close.
United States Steel Corporation (X)
A relative newcomer to the most active options listing, X stock drew heavy attention after U.S. Steel announced it was idling its Fairfield, Alaska, blast furnace in a move to cut down on raw material inventory. Additionally, JPMorgan upgraded X stock to “outperform” from “neutral” and lifted its price target to $28 from $26.
On the day, X saw more than 196,000 contracts change hands, with calls just edging out puts with 55% of the take. Volume was notably heavy at the Sep $20 put, where 5,593 contracts traded on open interest of just 629 contracts — a clear sign of new open interest arriving at this back-month strike.
Put activity is nothing new for X, as its total put/call open interest ratio currently stands at 1.16. In other words, puts outnumber calls among all option contracts currently open for X stock.
LinkedIn Corp (LNKD)
LNKD stock’s 2% drop on Thursday was compounded by a 5% plunge in after hours action as investors panned LinkedIn’s second-quarter earnings figures. By the numbers, LinkedIn said it earned 55 cents per share on revenue of $712 million, easily blowing past Wall Street’s estimates for earnings of 15 cents per share on sales of $679.78 million.
It would appear that the bar had been set exceedingly low after LinkedIn’s first-quarter report, and investors are reacting to what should have been an even stronger report. Furthermore, LinkedIn guided in line with Wall Street’s expectations, essentially keeping the bar low for the current quarter.
Options traders were split ahead of the report, with the 144,491 contracts traded on LNKD split evenly between calls and puts. With peak open interest of 2,855 contracts, look for the July 31 series $210 put to potentially come into play for LNKD ahead of expiration this afternoon.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
