The major market indices gave up and headed lower on Thursday, as Wall Street retreated from a wave of disappointing corporate earnings, lowered outlooks, and questionable economic data. What’s more, many on the Street believe that a rate hike from the Fed is already a foregone conclusion, no matter how bad this morning’s July employment data comes in. On the day, the S&P 500 fell 0.78% and is on pace to log its fifth weekly loss in seven weeks.
Options traders, too, gave up pretenses on Thursday, as volume fell across the board while put contracts rose in popularity. In fact, the CBOE’s single-session equity put/call volume ratio edged higher into week-high territory, arriving at 0.82. The 10-day moving average held at a two-week high of 0.71.
In equity options activity, Apple Inc. (NASDAQ:AAPL) returned to the top of the most active options listing following reports of Apple Music garnering 11 million subscribers. Meanwhile, Jim Cramer added to the growing bullish cacophony surrounding Netflix, Inc. (NASDAQ:NFLX), saying that the company should have a $100 billion market cap. Finally, reports show that Twitter Inc (NYSE:TWTR) is closer to offering “Buy” buttons in tweets after partnering up with Shopify Inc (NYSE:SHOP).
Apple Inc. (AAPL)
It’s been another rough week for AAPL stock, with the shares shedding 6.5% since Monday. There has been little for traders to cheer about, what with Bank of America downgrading AAPL to “neutral” from “buy” on Wednesday, and AAPL stock crashing through key technical support levels. On a bright note, Apple executive Eddy Cue said on Thursday that Apple Music has snapped up 11 million subscribers, with the service getting started on the right foot. More importantly, out of the 11 million free trial users, roughly 2 million have signed up for the $14.99 per month family tier plan.
On the options front, volume declined sharply to 921,641 contracts from the lofty volume of 2-million-plus contracts AAPL had seen earlier in the week. Calls were also back on top, accounting for 59% of Thursday’s total.
Looking ahead to next week, peak open interest of 7,988 contracts reside at the weekly Aug 14 series $110 put. This contract is currently trading just out of the money. Meanwhile, 7,719 call contracts are open at the overhead $123 strike in the weekly Aug 14 series.
Netflix, Inc. (NFLX)
While Twitter and Apple have struggled recently, NFLX stock has soared. The stock is coming to the end of a banner week after receiving a “buy” initiation at Guggenheim Partners and bullish commentary from RBC Capital Markets. TheStreet’s Jim Cramer put a cap on the week for NFLX, saying yesterday that the company should have a market capitalization of $100 billion while touting Netflix’s growth potential overseas.
Option volume has been brisk all week for NFLX, which usually ranks just outside of the daily top ten most active options. On Thursday, NFLX saw 343,462 contracts change hands, with calls accounting for 56% of the day’s volume.
Next week, it appears that options traders have set their sights on $130, with the weekly Aug 14 series $130 strike currently sporting peak open interest of 5,557 contracts. On the put side, peak open interest totals just 3,970 contracts at the $100 strike, likely representing put sell positions.
Twitter Inc (TWTR)
While investors are looking for Twitter to boost active subscriber numbers, the company is making plans to allow users to make purchases directly from tweets. According to reports, Twitter has partnered up with Shopify to offer “Buy” buttons in tweet. Twitter hopes to shore up revenue streams by attracting more retailers to its services.
With TWTR stock plunging during the past week, put volume has been rather heavy on the shares. That said, calls gained a slight edge on Thursday, snapping up 51% of the day’s volume of 156,017 contracts. TWTR traders will want to keep an eye on the 30 and 28.50 strikes next week, as they are home to peak put and call open interest of 2,118 contracts and 1,974 contracts, respectively.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
