Friday’s Vital Data: Pfizer Inc. (PFE), Twitter Inc (TWTR) and Starbucks Corp. (SBUX)

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Concerns about a December rate hike from the Fed dogged Wall Street on Thursday, sending the major market indices lower on the day. Heading into the open this morning, U.S. stock futures on the Nasdaq Composite, Dow Jones Industrial Average and the S&P 500 Index are hovering just above breakeven, pointing toward a flat open.

Despite interest rate concerns, options activity remained largely bullish on Thursday. Calls were once again in the driver’s seat, with the CBOE single-session equity put/call volume ratio coming in at 0.56. While the daily ratio only rose slightly, two-days of heavy call volume was enough to push the 10-day moving average to a three-month low of 0.67.

Turning to equity options, Pfizer Inc. (NYSE:PFE) has both Washington and Wall Street stirred up this morning after news broke that the company was considering a merger with Allergan (NYSE:AGN) as a means of corporate tax inversion. Elsewhere, Twitter Inc. (NYSE:TWTR) is still attracting heavy options volume as investors continue to fret over the company’s growth prospects. Finally, Starbucks Corp. (NASDAQ:SBUX) saw divided options activity on Thursday heading into last night’s quarterly earnings report.

10-30-2015 Top Ten Options

Pfizer Inc. (PFE)

Pfizer whacked a hornets nest last night when it announced that it was in early merger talks with Ireland-based Allergan. The merger would essentially be a corporate tax inversion for Pfizer, moving the company out of the U.S. and exempting the pharmaceutical giant from paying U.S. corporate taxes. Congress is clearly not happy with the news, and even activist investor Carl Ichan has expressed his displeasure.

Options traders, meanwhile, flooded PFE stock with speculation on Thursday. Volume swelled to well above PFE’s daily average, coming in at 342,099 contracts. Calls were the most popular, accounting for 72% of the day’s take, as traders began to explore potential arbitrage plays ahead of any definitive merger news.  

Taking a closer look at short-term options activity, call traders have focused heavily on the $33, $35, and $36 strikes in the weekly November 6 series. Peak call OI for the series totals 7,431 contracts at the out-of-the-money $36 strike, while 3,850 calls are currently open at the at-the-money $35 strike.

Twitter Inc. (TWTR)

TWTR stock continues to be a hot topic for options traders this week. It seems that traders just can’t let go of the company’s lackluster fourth-quarter guidance, leading to fears that Twitter may never grow beyond its current bounds. These concerns pushed the already struggling stock down another 5.9% on Thursday, with TWTR now perched just above $29.

Surprisingly, calls remain quite popular on TWTR stock. On Thursday, some 171,005 contracts traded on the issue, with calls accounting for 66% of the day’s take. That said, this may not be bullish activity for the shares — remember that calls are often purchased as hedges by short sellers. TWTR stockholders will want to keep a close eye on short interest in the next reporting period.

Starbucks Corp. (SBUX)

Options traders were split down the middle on SBUX stock heading into last night’s quarterly report. Overall, Starbucks saw 113,222 contracts change hands, with calls and puts split evenly at 50% of the day’s total volume. Puts had the upper hand among weekly October 30 series options, with peak put OI totaling 12,432 contracts at the out-of-the-money $54 strike. Another 7,056 contracts are currently open at the $59 strike.

The Street is still trying to make up its mind about the company’s quarterly report, sending SBUX stock down immediately after-hours on Thursday, but up slightly in premarket Friday trading. For the fourth quarter, Starbucks said it earned 43 cents per share on $4.9 billion in revenue, matching Wall Street’s expectations. However, first-quarter guidance was a little light, with Starbucks expecting to earn 44 or 45 cents per share, versus the consensus estimate for 47 cents per share.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/10/fridays-vital-data-pfizer-inc-pfe-twitter-inc-twtr-starbucks-corp-sbux/.

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