Wednesday’s Vital Data: Apple Inc. (AAPL), Rite Aid Corporation (RAD) and Twitter Inc (TWTR)

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Wall Street faltered on Tuesday, with the major market indices dipping on weak economic data on durable goods orders from the Commerce Department. That said, U.S. stock futures have turned higher this morning, with the Nasdaq Composite leading the way due to a solid earnings report from Apple Inc. (NASDAQ:AAPL). At last check, Nasdaq futures were up 0.31%, while futures on the Dow Jones Industrial Average were 0.14% higher and futures on the S&P 500 Index were up 0.19%.

Driven by a flood of speculation ahead of Apple’s quarterly report, option volume on the CBOE swelled to above-average levels on Tuesday. Overall, puts continued to gain popularity, as the CBOE single-session equity put/call volume ratio rose once again to hit 0.74, overtaking the 10-day moving average, which held at 0.72 for the ninth consecutive session.  

On the equity options front, Apple stock was hit with another wave of call volume on Tuesday, just ahead of last night’s third-quarter earnings report. Elsewhere, Twitter Inc (NYSE:TWTR) also saw brisk call volume ahead of earnings, though the smart money might have been puts as TWTR stock is off more than 10% in premarket trading. Finally, Rite Aid Corporation (NYSE:RAD) was flooded with call volume that could have an arbitrage spin following a $10 billion buyout offer from Walgreens Boots Alliance Inc. (NASDAQ:WBA).

10-28-2015 Top Ten Options

Apple Inc. (AAPL)

Call options traders took up positions on AAPL stock in Tuesday’s trading, ahead of what was likely the most anticipated quarterly earnings report this week. Volume swelled to an above-average 1.34 million contracts, with typically bullish call options snapping up 64% of the take.

Traders zeroed in on the weekly Oct 30 series $120 and $125 strikes, which sport open interest of 37,379 contracts and 35,168 contracts respectively. However, with AAPL stock up a mere 1.2% in premarket activity, these contracts appear to be long-shots unless additional drivers push the shares higher.

Taking a look at the numbers, Apple said it earned $1.96 per share in the third quarter, topping expectations for $1.88 per share. Revenue came in at $51.5 billion, versus $50.8 billion expected. IPhone shipments were strong at 48 million, while iPad sales were below expectations at 9.88 million. There was still no mention of Apple Watch sales — a fact that will probably weigh on AAPL stock.

Twitter Inc (TWTR)

Call options were also popular ahead of Twitter’s third-quarter report, though the results appear to be drastically different from Apple’s. TWTR saw brisk short-term volume of 308,673 contracts, with calls accounting for 58% of yesterday’s activity. Peak weekly Oct 30 series call OI is currently centered at the deep out-of-the-money $35 strike (31,670 contracts), with peak put OI resting at the just out-of-the-money $28 strike (10,674 contracts).

TWTR puts appear to be smart money at the moment, with the stock trading more than 10% lower in premarket activity. Twitter third-quarter earnings more than doubled expectations, coming in at 10 cents per share versus the Street’s target of 5 cents per share. Revenue also bested consensus targets, arriving at $569.2 million versus $559.59 million.

However, guidance whiffed Wall Street targets. Twitter expects fourth quarter revenue of $695 million to $710 million, while analysts expected revenue of $739.73 million.

Rite Aid Corporation (RAD)

RAD stock skyrocketed more than 42% on Tuesday after reports emerged that Walgreens Boots Alliance (the No. 2 pharmacy chain) bid roughly $10 billion for Rite Aid (the No. 3 pharmacy chain). The deal has yet to be formalized, and it must still pass regulatory and antitrust hurdles, but this hasn’t stopped options traders from reveling in speculation.

Specifically, RAD saw record option volume of 430,239 contracts on Tuesday. Calls made up the majority of the day’s activity, accounting for 73% of RAD’s total volume. While some of these contracts may have been attempts to ride RAD’s coattails higher, most of Tuesday’s call volume was likely arbitrage related to the potential buyout deal.

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/wednesdays-vital-data-apple-inc-aapl-rite-aid-corporation-rad-twitter-inc-twtr-options/.

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