The major market indices recovered from early losses on Tuesday to finish with modest gains on the day. Reports of a potential short-term deal for Greece bolstered confidence on Wall Street, just as the S&P 500 breached its 200-day moving average for the first time since October.
Not fully buying into the bounce, options traders pushed volume to pre-summer levels as many sought out protection. The CBOE single-session equity put/call volume ratio chugged higher to 0.78, pulling the 10-day moving average to an annual peak of 0.71.
Turning to Tuesday’s volume leaders, Apple Inc. (NASDAQ:AAPL) saw confidence falter a bit after reports surfaced that Apple Watch sales plunged just three months after debuting. Meanwhile, overbought shares of Tesla Motors Inc (NASDAQ:TSLA) plunged after an analyst downgraded the stock on valuation concerns — and a second was chiming in Wednesday morning.
Finally, cratering copper prices pulled Freeport-McMoRan Inc (NYSE:FCX) stock more than 3% lower on Tuesday.
Apple Inc. (AAPL)
It would appear that Apple doesn’t have the Midas touch after all, as new market research out Tuesday indicated that sales of the Apple Watch have plunged 90% in the three months since the gadget’s launch. After flying off the shelves at a pace of nearly 200,000 per day in the first week, Apple Watch sales have dwindled to about 10,000-20,000 per day since April, according to Slice Intelligence.
News of the faltering iProduct overshadowed Vetr’s upgrade of AAPL stock to “strong buy” from “buy.” Currently, AAPL sports 36 “buy” ratings, 12 “holds” and just one “sell” rating, according to Thomson/First Call.
AAPL stock options volume returned to near normal levels for the shares on Tuesday, with nearly 800,000 contracts changing hands on the day. That said, puts had more of a hand in the day’s activities than normal, with calls only accounting for about 58% of Tuesday’s volume, compared to typical levels north of 65%.
Looking at weekly July 10 series open interest, calls still hold an overall edge. Traders are heavily focused on both the July $128 and $130 strikes, with more than 24,000 call currently open at each. On the put side, open interest is rising at the $124 and $123 strikes, which both sport roughly 20,000 contracts each.
Tesla Motors Inc (TSLA)
With TSLA stock up nearly 50% in the past four months, someone was bound to call Tesla’s valuation into question sooner or later. That someone was Deutsche Bank, which downgraded TSLA stock to “hold” from “buy” on Tuesday. Still, the brokerage remained upbeat on the stock, lifting its price target to $280 from $245 while citing the company as a “dominant player” in the electric vehicle market.
TSLA stock fell more than 4% following the note, retreating from all-time high territory north of $280. Options traders appeared a bit shaken, as puts accounted for a higher-than-normal 47% of the day’s volume of 138,240 contracts. Peak weekly July 10 series open interest levels still rest with calls, however, with 3,460 contracts open at the $280 strike, while another 3,016 call contracts call the $275 strike home.
As a note, Tesla suffered another downgrade this morning, with Pacific Crest cutting TSLA to “sector weight” from “overweight.” TSLA was off about 2% in Wednesday’s premarket trading.
Freeport-McMoRan Inc (FCX)
Copper prices have cratered in the past month, with the spot pricing falling more than 12%. With Freeport-McMoRan already struggling with demand issues, an implosion in commodities prices is the last thing the company needs.
While FCX recovered from its worst losses of the day — the stock was down as much as 10% at its lowest point — turmoil in Chinese markets and slowing demand forced FCX to a loss of more than 3% on the day, with another 2% loss in after-hours trading.
Options traders appeared to remain somewhat optimistic for struggling FCX stock. With 148,866 contracts trading on the day, calls accounted for roughly 54% of the activity. For the week, peak weekly July 10 series open interest lies at the $20 call strike, outstripping all comers with 14,377 contracts. By comparison, peak put open interest for the series totals just 1,869 contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
