With a Greek debt deal in the bag, stocks picked up on Monday where they left off heading into the weekend. The major market indices rallied more than 1% across the board, with the S&P 500 up 1.11%, stopping just shy of its 50-day moving average. Despite the first major earnings season salvos hitting this morning, option volume was weak on Monday.
On the CBOE, calls continued to gain favor, with the single-session equity put/call volume ratio falling to a two-week low of 0.55. The 10-day moving average finally retreated from its annual highs to close at 0.73.
We’ll take a look at three stocks with some of the most heavily traded options of late: Apple Inc. (NASDAQ:AAPL), Facebook Inc (NASDAQ:FB) and JPMorgan Chase & Co. (NYSE:JPM):
Apple Inc. (AAPL)
Apple options volume was well below average despite the stock adding nearly 2% as Societe Generale upgraded AAPL to “buy” from “hold,” though it maintained a $140 price target. Societe said it expected strong average selling prices for iPhone and Apple Watches, with China revenue growing an estimated 30% in the second quarter. Apple will step up to release its quarterly earnings report after the close on July 21.
Taking a closer look at AAPL stock options, some 680,000 contracts traded on Monday, below the security’s daily average for the past couple of months. Still, options traders appeared to remain bullish, with calls accounting for 60% of the day’s activity.
Looking ahead to the weekly July 24 series (since Apple is reporting earnings on the 21st), we find that peak open interest of 29,166 contracts currently rests at the just overhead $126 call strike, with another 24,102 contracts open at the $130 call strike. On the put side, open interest is a bit anemic, with peak OI totaling 9,073 contracts at the out-of-the-money $120 strike.
Facebook Inc (FB)
Pivotal Research doesn’t like social media stocks right now. In fact, the research firm downgraded and cut its price target on several stocks yesterday, including Google Inc (NASDAQ:GOOG, NASDAQ:GOOGL), Twitter Inc. (NYSE:TWTR), Yahoo! Inc. (NASDAQ:YHOO) and Facebook. For the record, Pivotal cut Google to “hold” from “buy,” and trimmed its price target on the rest, with FB stock getting a haircut to $105 from $107.
But FB stock traders weren’t listening, sending the shares nearly 2.5% skyward to hit a fresh all-time high above $90. With psychological and technical resistance breached at the round-number $90 level, FB stock could be set to extend its longer-term rally, despite negative sentiment from the brokerage community.
Options traders appear to be hedging their bets to the upside. Volume soared to more than 326,000 contracts on Monday, easily eclipsing FB’s daily average for the past several weeks. Furthermore, calls accounted for 71% of the day’s activity, hinting at bullish activity from the group.
JPMorgan Chase & Co. (JPM)
Options activity reached a near-term peak on JPM stock yesterday, as traders rushed to place bets on the stock ahead of this morning’s quarterly earnings report. JPMorgan easily bested Wall Street’s second-quarter earnings targets, posting a profit of $1.54 per share, versus expectations for $1.44 per share. The earnings whisper was set at $1.50 per share. Revenue also arrived north of expectations, coming in at $24.53 billion.
Taking a closer look at JPM’s options activity, volume reached 105,133 contracts on Monday, with calls making up only about 54% of the haul. While the call-heavy monthly July $67.50 strike (38,423 contracts) is now trading in the money, the overhead $70 strike is home to peak July call open interest of 41,699 contracts. This level could be a sticking point for JPM over the short term.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
