Monday marked the close to one of Wall Street’s most dismal months since 2010, as the major market indices shed more than 6% in August. The month ended with losses across the board, as the S&P 500 slipped 0.8%. While there were rumors of more Chinese stimulus, a dramatic rebound in crude prices helped drive most of Monday’s malaise.
Option volume fell sharply on Monday, with activity dropping to mid-Summer levels for equity options. Overall, the CBOE’s single-session equity put/call volume ratio fell to a two-week low of 0.66, while the 10-day moving average held at 0.79 for the fourth consecutive session.
Turning to equity options activity, Apple Inc. (NASDAQ:AAPL) saw call volume return after Citigroup added the stock to its “buy” list. Twitter Inc (NYSE:TWTR) calls were also active after the stock was hit with a rare upgrade at SunTrust Robinson Humphrey, and Alibaba Group Holding Ltd (NYSE:BABA) eked out a few call contracts despite being the whipping boy for Chinese market weakness.
Apple Inc. (AAPL)
AAPL continued to bounce around below resistance at its 20-day moving average on Monday, even though Citigroup added the stock to its “buy list.” Additionally, reports surfaced that Apple is in talks with TV producers to provide exclusive content for Apple TV. Heading into the open, AAPL stock is down more than 2% in pre-market trading, with the shares hovering just above short-term support in the $110 region.
Option activity was well below average for AAPL stock on Monday, with only about 580,000 contracts changing hands on the day. That said, the recent trend for AAPL put volume slacked off, with calls claiming 56% of the day’s total activity.
Looking at weekly September 4 series options, AAPL is currently bounded by heavy put open interest at the $105 strike, totaling 10,110 contracts, and by moderate call open interest of 10,373 contracts at the $113 strike. Peak weekly September call OI, for the record, totals 22,273 contracts at the out-of-the-money $115 strike.
Twitter Inc (TWTR)
The struggling shares of microblogging site Twitter received a rare upgrade on Monday, with SunTrust Robinson Humphrey lifting TWTR stock to “buy” from “neutral.” SunTrust set a price target of $38 per share for TWTR stock, representing 37% upside from current prices. TWTR is currently trading down 22.5% year-to-date, as shares struggle with overhead resistance at $30 and its 10-day and 20-day moving averages.
TWTR option activity had a notably bullish slant on Monday. Overall, 157,865 contracts traded on the stock, with calls snapping up 74% of the day’s take. In the weekly September 4 series, traders are focused on the out-of-the-money $28.50 call, with 7,906 contracts in open interest. On the put side, the weekly September $27 strike is the most sought after, with OI totaling 3,180 contracts.
Alibaba Group Holding Ltd (BABA)
BABA stock has become something of a touchstone for Chinese stocks on Wall Street. While there was no particular company news driving BABA stock’s nearly 6% plunge on Monday, shares were on the receiving end of fear stemming from another poor report on Chinese economic growth. Specifically, Australia’s Sydney Morning Herald reminded investors that Moody’s cut its 2016 Chinese economic growth forecast from 6.5% to 6.3% on Friday.
Monday’s options activity was mixed on BABA stock. Volume came in at an anemic 120,290 contracts, with calls and puts trading in near parity on the day. Near-the-money BABA puts are all the rage in the weekly September 4 series, with peak put open interest totaling 5,562 contracts at the $65 strike. On the call side, the deep out-of-the-money $73 strike is the most popular, sporting OI of 7,879 contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
