The major market indices came roaring back on Thursday, as indications that the Fed may not be able to raise rates until next year washed away Wal-Mart Stores Inc.’s (NYSE:WMT) retail sector fears. Driven by the promise of continued cheap money, the Nasdaq Composite led the way higher with a gain of 1.8%, while the Dow Jones Industrial Average lagged with a 1.3% advance.
Options volume flirted with above-average activity on Thursday, as put traders took to the Street to bolster positions amid the rally. Overall, the CBOE single-session equity put/call volume ratio rose to a two-week high of 0.87, while the 10-day moving average edged higher to 0.72.
In equity option activity, Netflix, Inc. (NASDAQ:NFLX) continued to see record short-term option volume in the wake of the company’s third-quarter earnings miss, while General Electric Company (NYSE:GE) volume also surged heading into this morning’s quarterly report. Finally, Citigroup Inc (NYSE:C) made a rare appearance on the top 10 most active options listing, as call volume spiked following stronger-than-expected earnings.
Netflix, Inc. (NFLX)
We saw it coming yesterday morning, as NFLX traded more than 5% lower heading into the open on Thursday after Netflix missed third-quarter earnings expectations. By the close, Wall Street had blasted NFLX stock more than 8% lower, as bears doubled down on the stock. Options volume remained brisk on Netflix, with more than 462,000 contracts changing hands on the issue. That said, sentiment remained divided among options traders, with calls garnering 53% of the day’s take.
Despite the stock’s post-earnings plunge, there is a positive takeaway for NFLX bulls — the shares held at support near $100. Premarket trading is calling this support into question, but heavy OI at the Oct $100 strike could provide ballast through the close of trading today. Specifically, 6,247 calls and 17,375 puts are currently open at the Oct $100 strike, creating a bit of a battleground for NFLX today.
General Electric Company (GE)
Option volume was also significant for GE stock on Thursday; a whopping 394,242 contracts changed hands in the typically docile GE options pits. Sentiment remained uncertain, however, with calls only accounting for 52% of yesterday’s total volume.
Bright and early this morning, GE reported earnings of 29 cents per share for the third quarter, with revenue arriving at $31.68 billion. Wall Street was looking for earnings of 26 cents per share on sales of $28.67 billion. The whisper number rested at 27 cents per share.
Heading into today’s trading, GE watchers will want to keep a close eye on option activity in the $27, $27.50, and $28 strikes — each of which sport OI of more than 10,000 put and call contracts. Unless GE breaks out of this tight range on the open, look for the shares to remain range-bound through the close this afternoon.
Citigroup, Inc. (C)
Citigroup was also a rare sight on the most active options listing, as volume spiked to more than 135,000 contracts. Calls were the vehicle of choice, accounting for 65% of Thursday’s total volume. Options traders were reacting to Citigroup’s third-quarter report, where the company bested Wall Street’s earnings and revenue targets.
C stock rose nearly 4.5% on Thursday, placing the stock well north of peak October put and call open interest, totaling 19,993 contracts and 29,983 contracts, respectively. With light options-related resistance overhead, C stock could easily capitalize on any market rally into the close of the week, with only its 200-day moving average left to contend with.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
