Stocks traded modestly lower on Thursday, but Wall Street largely held its ground ahead of this morning’s October nonfarms payroll report. The key jobs data could be crucial in the Fed’s monetary policy meeting in December.
In premarket trading, U.S. stock futures appear to be discounting solid jobs numbers, as futures on the Nasdaq Composite, Dow Jones Industrial Average, and the S&P 500 Index are hovering just below breakeven heading into the open.
Option volume remained strong on Wall Street on Thursday, with heavy arbitrage activity on General Electric Company (NYSE:GE) and Apple Inc. (NASDAQ:AAPL) driving the majority of the day’s activity. Overall, calls reasserted themselves on the CBOE, with the single-session equity put/call volume ratio falling for the first time in five sessions, slipping to a two-week low of 0.63. As a result, the 10-day moving average hit yet another four-month low at 0.64.
On the equity options front, Facebook Inc. (NASDAQ:FB) calls took center stage after the social media giant topped Wall Street’s third-quarter earnings and revenue targets. Elsewhere, QUALCOMM, Inc. (NASDAQ:QCOM) also drew call volume despite QCOM stock plunging more than 15% following a disappointing trip to the earnings confessional. Finally, Nvidia Corporation (NASDAQ:NVDA) was inundated with call volume ahead of the company’s third-quarter report. With NVDA stock up nearly 10% premarket, calls appear to have been the smart money play.
Facebook Inc. (FB)
FB stock rallied more than 4.6% on Thursday after the company’s third-quarter report bested both top line and bottom line expectations. Earnings came in at 57 cents per share on revenue of $4.50 billion, well above the consensus targets for 52 cents per share and sales of $4.37 billion. Furthermore, Morgan Stanley (NYSE:MS), Barclays PLC (ADR) (NYSE:BCS) and Credit Suisse Group AG (ADR) (NYSE:CS) all lifted their respective price targets on FB stock.
Option volume was well above average for FB stock, with 912,306 contracts changing hands on the session. FB bulls were out in force, with calls accounting for 70% of the day’s take. Looking at weekly November 6 series options, any continuation to FB’s post-earnings rally may need to wait until next week.
Specifically, the shares are facing a dual layer of heavy call open interest at the $109 and $110 strikes, with 6,818 contracts and 34616 contracts in OI, respectively. Combine this with trepidation over the Fed’s December monetary policy meeting, and FB could be facing stiff headwinds heading into the weekend.
QUALCOMM, Inc. (QCOM)
QCOM stock was pounded yesterday, with the shares tagging a fresh 52-week low after QUALCOMM placed first-quarter guidance well below Wall Street’s expectations. For the first quarter, QUALCOMM said it expects earnings of between 80 cents and 90 cents per share on revenue of $6 billion.
The consensus had its sights set on earnings of 91 cents per share on revenue of $5.63 billion. Analysts saw the lowered guidance as a warning of headwinds in Qualcomm’s mobile business after the company lost key deals with Apple and Samsung Electronics Ltd.
Options traders may be looking for a rebound in QCOM stock given yesterday’s overall volume. On the day, some 240,000 contracts changed hands on QCOM stock, with calls accounting for 62% of the day’s take. Heading into the weekend, QCOM is trading below all major call and put accumulations in the weekly November 6 series, though there are still about 1,252 contracts left at the $50 put strike that could add options-related support to technical support in the region.
Nvidia Corporation (NVDA)
NVDA stock looks ready for a breakout this morning, as the shares are up about 8% in premarket trading, hovering around or slightly above former resistance at $30. Driving activity this morning is Nvidia’s impressive third-quarter earnings report, where the company posted a profit of 46 cents per share on revenue of $1.3 billion. Wall Street was expecting earnings of 25 cents per share on revenue of $1.18 billion. The whisper number was 28 cents per share.
Calls dominated NVDA stock’s options activity on Thursday, accounting for 90% of the 145,045 contracts changing hands on the issue. If NVDA can successfully clear $30, the shares will have eclipsed a wealth of potential options-related resistance. More than 28,000 contracts at the $30 call strike in the weekly November 6 series are set to open half-a-point in the money this morning. The next potential issue for NVDA stock lies at the $32 strike, where 13,219 contracts reside.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
