The major market indices rallied roughly 1.5% across the board on Friday, as Wall Street looked at the silver lining of a poor September jobs report. Traders interpreted the weak economic data as a driver for continued low interest rates, with the Federal Reserve now not seen raising rates until much later this year, or into 2016. On the day, the Dow Jones Industrial Average added 1.23%, while the Nasdaq Composite rose 1.74%.
On the options front, calls returned to favor on Friday, gaining an extra boost in activity from weekly Oct. 2 series expiration. On the CBOE, the single-session equity put/call volume ratio fell to a three-week low of 0.67, while the 10-day moving average slipped to a two-week low of 0.76.
Diving deeper into equity options activity, Apple Inc. (NASDAQ:AAPL) volume pushed higher after the company announced it was pushing its Apple Watch out to Target (NYSE:TGT) locations across the U.S. Meanwhile, Bank of America Corp (NYSE:BAC) saw volume surge to short-term highs after the potential for wider margins from a Fed rate hike evaporated with Friday’s jobs report. Finally, Netflix, Inc. (NASDAQ:NFLX) traders were also call happy in the wake of a bullish research note from Cantor.
Apple Inc. (AAPL)
Starting Oct. 18, shoppers will be able to find the Apple Watch at their local Target store. The move, in conjunction with a broader rollout of the smartwatch to Apple retail locations, is expected to help drive sales and reach of the device. Apple watch sales expectations have been maligned by some in the analyst community, so any move that boosts sales should be a boon for Apple.
AAPL option volume held near average levels on Friday, despite a jump in overall volume on the CBOE. Some 876,000 contracts changed hands on AAPL, with calls only scraping together about 53% of the day’s total volume.
As I noted on Thursday, AAPL stock had a hard time straying too far from the $110 mark on Friday, with heavy weekly Oct. 2 series open interest at the $110 strike limiting mobility. Turning to the weekly Oct. 9 series, traders have already staked out ground at the $110 put (11,669 contracts) and the $112 call (11,854 contracts), creating a potential trading range for the shares this week.
Bank of America Corp (BAC)
The prospect of wider lending margins for BofA evaporated on Friday with the arrival of weaker-than-expected September nonfarms payrolls. With the Fed now unlikely to raise interest rates until December or later, BAC stockholders will have to wait a bit longer, prompting a short-term dip in the stock. Bank of America is now hovering just above technical support at the $15 level — an area that shares have not breached on an intraday basis since Aug. 24.
Options volume surged to a near-term high for BAC on Friday, with 654,000 contracts changing hands. What’s more, call traders dominated the landscape, with these typically bullish bets accounting for 64% of the day’s take.
Weekly Oct. 9 series OI currently highlights expectations for a rebound among short-term options traders. Peak OI for the series totals 28,706 contracts at the overhead $15.50 strike, while some 16,600 calls reside at the $16 strike, and another 10,498 calls are open at the $16.50 strike.
That said, unless BAC finds its feet early in the week, the stock could be hindered by options-related resistance at these strikes.
Netflix, Inc. (NFLX)
NFLX stock wound its way into Cantor’s eWeekly update on Friday. The brokerage firm talked about Netflix’s expansion into original content for younger viewers by launching seven new titles for “older kids” as well as a slate of shows for preschool children. According to Netflix, “Roughly half of our 65 million members around the world regularly watch kids content.” Overall, Cantor reiterated its “buy” rating and $125 price target for NFLX stock.
Option volume was brisk on NFLX on Friday, as an above-average 218,000 contracts changed hands on the issue. Calls were also unusually popular for the stock, accounting for 60% of all of Friday’s activity. In weekly Oct. 9 series activity, traders are still heavily focused on the $100 strike, with 2,655 call contracts and 3,149 put contracts open here. Call traders have branched out, however, with the overhead $110 strike sporting OI of 2,545 contracts at last check.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
