Stocks bounced back from Greek debt crisis-driven losses Tuesday, with the major market indices posting nominal gains on the day. Wall Street still has hopes that Greece will come to some form of agreement regarding its debt situation, though a default was unavoidable.
Options bears remained active on yesterday, as the CBOE equity put/call volume ratio slipped from its year-to-date high to hold at 0.84. The 10-day moving average rose to a three-month high 0.67.
Buyout talks were all the rage in the options pits on Tuesday. Put volume spiked on Advanced Micro Devices, Inc. (NASDAQ:AMD) despite reports surfacing that Microsoft Corporation (NASDAQ:MSFT) may be interested in snapping up the struggling semiconductor maker. Meanwhile, Twitter Inc (NYSE:TWTR) continues to see speculation that Google Inc (NASDAQ:GOOG, GOOGL) could gobble up the social media firm in a move to bolster search results. Lastly, Walt Disney Co (NYSE:DIS) continued to drive higher with nothing news-specific pushing it Tuesday.
Let’s take a closer look at what was driving the action in these three stocks.
Advanced Micro Devices, Inc. (AMD)
Citing the ever elusive “people familiar with the matter,” gaming news site KitGuru reported that Microsoft may be looking to acquire semiconductor firm AMD. AMD currently supplies graphics chips for the Xbox One console, with Microsoft already shelling out $1.26 billion for chips from AMD. With AMD’s current market cap at $1.82 billion, an acquisition could save Microsoft considerable money over the long run.
Options traders don’t appear as optimistic when it comes to AMD stock. The shares were flooded with put activity on Tuesday. Overall, a short-term record 414,708 contracts traded on AMD, with puts accounting for a whopping 97% of the day’s volume.
That said, calls remain dominant in terms of open interest for AMD – which isn’t surprising given that the stock is trading in the low single digits. Currently, peak August call OI totals 16,459 contracts at the overhead $2.50 strike, while another 5,715 calls are open at the $3 strike. On the put side, peak OI totals 3,424 contracts at the in-the-money $2.50 strike in the August series.
Twitter Inc (TWTR)
Takeover speculation drove TWTR stock nearly 6% higher on Tuesday, with rumors of a Google buyout of Twitter taking hold on the Street once again. This time, a report from Canaccord Genuity Group stated that Twitter is making search-related improvements to its website in a move to better improve user experience with its Google tie-in. Canaccord reiterated its “buy” rating on TWTR, with a price target of $52.
Options volume swelled on TWTR stock following the report, with 241,674 contracts pushing activity well above the daily average. Additionally, calls were responsible for roughly 80% of Tuesday’s total volume.
Looking at monthly July open interest, options traders are heavily focused on the out-of-the-money $40 call strike, which sports peak open interest of 27,565 contracts. Another 24,941 contracts also reside at the just overhead $37 strike. Put open interest, meanwhile, is focused at the $34 and $35 strikes, with more than 9,400 contracts open each.
Walt Disney Co (DIS)
DIS stock has been on hot this year, driven by a string of blockbuster movies and anticipation for upcoming hits arriving later this year. The stock has weathered the recent Greek-induced turmoil rather well, hitting a fresh all-time high of $115.27 last week. The shares are currently perched just above their 10-day moving average, with additional support rising into the area in the form of their 20- and 50-day trendlines.
There was no major headline news driving DIS stock on Tuesday, but the shares are trading ex-dividend today. Disney will issue a semiannual cash dividend payment of 66 cents per share on July 29, with shareholders of record as of yesterday’s close eligible.
As such, options traders flocked to DIS call options on Tuesday in a bid to capture said dividend. Some 167,000 DIS contracts changed hands, easily eclipsing the stock’s average daily volume. As expected, calls were responsible for nearly 90% of Tuesday’s overall volume.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
