Stocks rebounded sharply on Monday, with the S&P 500 snapping its recent losing streak by jumping 1.28% on the day. Wall Street kicked off the week in a good mood, as sentiment was bolstered by a 2% jump in crude prices,hopes that the Fed may delay a rate hike, and expectations that the People’s Bank of China would take a more proactive stance on inflation.
Options volume returned to summer levels on Monday, though calls were once again a favorite among many speculators. In fact, the CBOE’s single-session equity put/call volume ratio plunged from one-week high territory to finish at a one-week low of 0.66. The 10-day moving average retreated to 0.70.
In equity options activity, Twitter Inc (NYSE:TWTR) drew considerable call option activity after expanding an existing deal with the NFL and scoring an analyst upgrade from Monness Crespi Hardt. Also in analyst action, Stifel reiterated its rating and boosted its price target on Netflix, Inc. (NASDAQ:NFLX). On the earnings front, Alibaba Group Holdings Ltd (NYSE:BABA) dropped $4.63 billion on a 20% stake on a Chinese electronics retailer ahead of this afternoon’s quarterly earnings report.
Twitter Inc (TWTR)
Beaten-down TWTR stock saw signs of life on Monday, as the shares jumped more than 9% to flirt with the $29.50 region. Monness Crespi Hardt upgraded Twitter stock to “buy” from “neutral” while maintaining a $35 price target, while Twitter announced it has expanded its content deal with the NFL. Financials terms of the deal were not announced, but, beginning with 2015 preseason games, the NFL will triple the amount of content it sends to Twitter, including in-game pictures and video highlights.
TWTR option volume swelled to near-term highs following the news, with more than 235,000 contracts changing hands on the microblogging stock. Calls were the investment vehicle of choice, accounting for 73% of the day’s activity.
Digging into weekly Aug 14 series activity, options traders have painted a target on the round-number $30 level, with call open interest swelling to more than 8,600 contracts. Also of note are the $29 call strike, with 6,117 contracts open, and the $28.50 and $29.50 strikes, which both sport OI in excess of 4,600 contracts.
Netflix, Inc. (NFLX)
After blowing off some steam in mid-July following a blowout second-quarter earnings report, NFLX stock popped above potential resistance at the $120 level last week, and the shares are looking to solidify their hold in trading this week. Helping to provide some lift for NFLX, Stifel reiterated its “buy” rating on NFLX while boosting its price-target from $128 to $143. According to Stifel, Netflix should be able to top 80 million U.S. subscribers by 2024 — a figure above the company’s current guidance.
Options traders have become cautious on NFLX stock recently, with put volume slowing gaining favor. On Monday, volume came in at 161,065 contracts, with puts accounting for 52% of the day’s take. For the current week, the deep out-of-the-money Aug 14 series $130 call strike is tops in terms of open interest, sporting OI of 7,616 contracts. Closer to home, OI at the $122 call comes in at 4,160.
Alibaba Group Holdings Ltd (BABA)
Alibaba went shopping ahead of Wednesday’s first-quarter earnings report. Early yesterday morning, Alibaba announced it was buying a 20% stake in Chinese electronics chain Suning for $4.63 billion. As a result, Suning is set to open an outlet on Alibaba’s Tmall platform and work with the company’s Cainiao delivery system.
As for earnings, Alibaba is expected to post a profit of 58 cents per share, up roughly 40% year-over-year, on revenue of $3.4 billion, up 33.6% from year-ago levels. The whisper number currently forecasts earnings of 63 cents per share.
As for BABA options, calls have become quite popular heading into tonight’s report. Volume came in at 121,606 contracts on Monday, with call options making up 74% of the day’s activity. The two levels to watch heading into tonight’s report are the weekly Aug 14 series $85 call, where peak OI of 8,483 contracts resides, and the $77.50 put, which sports OI of 6,332 contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
