Wall Street’s winning streak ended on Tuesday, as the major market indices faltered ahead of a slew of third-quarter earnings reports. In fact, 20% of the S&P 500’s components are slated to release earnings this week. On the day, the Nasdaq Composite was the loss leader, shedding 0.87%, while the Dow Jones Industrial Average dipped just 0.29%.
Options volume rebounded from Monday’s holiday low, with put traders looking to make up for lost time. The CBOE single-session equity put/call volume ratio extended Monday’s gains, jumping to a one-week high of 0.8. The 10-day moving average, meanwhile, hit its second consecutive two-month low at 0.7.
On the equity options front, Bank of America Corp (NYSE:BAC) drew heavy call volume ahead of last night’s third-quarter earnings report, while Intel Corporation (NASDAQ:INTC) was put heavy after fourth-quarter guidance came in light. Elsewhere, Netflix, Inc. (NASDAQ:NFLX) continued to draw uncertainty from options traders ahead of tonight’s third-quarter report.
Bank of America Corp (BAC)
This morning, BofA posted third-quarter profit of 37 cents per share on revenue of $4.51 billion, blowing past Wall Street’s expectations for a profit of 33 cents per share. CEO Brian Moynihan told shareholders that BAC would look to further increase revenue growth, which has been limited in the current zero-interest-rate environment, by trimming expenses over the next quarter.
Heading into the event, options traders flooded BAC with calls. Volume swelled to a near-term high of 545,498 contracts, with 78% of those crossing the tape as calls. BAC stock was up more than 2.6% in after hours trading last night, putting the shares just shy of $16.
The $16 region could be a sticking point for BAC stock, as some 116,978 call contracts are currently open at this strike in the October series. A breakout here would be a coup for BAC bulls, though the stock’s 50- and 200-day moving averages remain perched just overhead.
Intel Corporation (INTC)
INTC stock fell on Tuesday in the wake of Intel’s third-quarter report. The company earned 64 cents per share on revenue of $14.5 billion on the quarter, topping expectations for 59 cents per share on sales of $14.22 billion. However, fourth-quarter revenue guidance of $14.3 billion to $15.3 billion was underwhelming compared to Wall Street’s target for $14.83 billion — proof that Intel is still struggling with flagging PC sales.
Option volume was robust for INTC stock on Tuesday, hitting a near-term high of 262,875 contracts traded. Puts were the flavor of choice, owing to Intel’s drop, accounting for 56% of the day’s take. INTC is now hovering just above support near $31 in premarket trading, down 2% at last check. October OI is pointing toward potential support near $31, with 38,437 put contracts open at this strike. Additionally, some 52,890 puts reside at the round-number $30 strike.
Netflix, Inc. (NFLX)
Online media mogul Netflix will join the earnings parade after the close of trading this afternoon, with NFLX stock facing a wall of worry ahead of the event. As I noted yesterday, puts have been quite popular on NFLX during the past several weeks, with the stock’s October/November put/call OI ratio resting at 1.15.
Tuesday’s options volume likely did little to move the sentiment needle, as calls only made up 52% of the day’s 152,523 contracts in total volume. Traders should keep a close eye on hevy October OI levels as a way to judge expectations heading into tonight’s event.
Currently, 10,701 calls and 6,868 puts are open at the near-the-money Oct $110 strike, while 15,580 calls and 4,311 puts reside at the $115 strike. Peak OI for both puts and calls resides at the $105 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
