The major market indices retreated on Wednesday after Wall Street’s confidence in a rate-hike delay was shaken by a solid ADP employment report and hawkish comments from Federal Reserve Chairwoman Janet Yellen. 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 all pointing higher by roughly 0.30%, as Wall Street turns its attention to tomorrow’s nonfarm payroll report.
Option volume flooded back on to the Street on Wednesday, driven by near-term high activity on Apple Inc. (NASDAQ:AAPL). Overall, the the CBOE single-session equity put/call volume ratio rose for the fifth-consecutive session, arriving at 0.73. The 10-day moving average, meanwhile, dipped to a four-month low of 0.65.
On the equity options front, Wednesday was an arbitrage kind of day. For starters, AAPL stock saw record short-term call volume ahead of its ex-dividend date. Elsewhere, General Electric Company (NYSE:GE) options activity remained brisk as the deadline for the stock swap with Synchrony Financial (NYSE:SYF) draws nearer. Finally, Walt Disney Co (NYSE:DIS) options traders appeared divided ahead of today’s third-quarter earnings report.
Apple Inc. (AAPL)
Apple’s third-quarter dividend is fast approaching, and only shareholders as of the close this afternoon will be eligible for a part of the $3 billion being paid out. The payout, slated for Nov. 12, will see Apple shell out a quarterly dividend of 52 cents per share, prompting a rush of activity among AAPL stock options traders.
In fact, more than 2.28 million AAPL contracts traded on Wednesday. Since most popular dividend capture strategies involve call options to some degree, it should come as no surprise that AAPL calls accounted for roughly 88% of yesterday’s total volume.
Looking at weekly Nov 6 series open interest, options traders have focused heavily on the out-of-the-money $125 call strike, which currently sports OI of 32,332 contracts. On the put side, peak open interest totals 15,402 contracts at the $120 strike. With a full trading session left to establish ownership, look for today’s option volume on AAPL to approach or eclipse yesterday’s total.
General Electric Company (GE)
Decision time is fast approaching for GE shareholders. Essentially, shareholders must decide whether they want to swap their current GE shares for shares of Synchrony — formerly GE’s consumer credit card unit. GE stockholders can swap some, all, or none of their current holdings, but the decision must be made by Nov 12. As such, option volume related to the swap is ramping up quickly due to arbitrage and other swap strategies.
Turning toward Wednesday’s activity, General Electric saw overall volume eclipse one million contracts. Calls were the most popular on the session, accounting for 57% of GE’s total volume on the day. As for short-term weekly Nov 6 series activity, peak OI totals 10,617 contracts at the $28.50 put, with another 8,552 puts open at the $29 strike. On the call side, peak OI totals 7,504 contracts at the $29.50 strike, while another 6,931 contracts are open at the $30 strike.
Walt Disney Co (DIS)
Following a rough week for media conglomerates, the Mouse’s House will step up to release its third-quarter report after the close tonight. Time Warner Inc (NYSE:TWX) already set a negative tone heading into Disney’s trip to the earnings confessional by sharply lowering guidance. Still, this hasn’t slowed speculation for Disney, as EarningsWhipser.com reports a third-quarter whisper number of $1.18 per share — a penny ahead of the Street’s view.
Options traders appeared divided heading into today, with calls (56% of total volume) only slightly ahead of puts in Wednesday’s 158,064 total traded contracts. With DIS trading near $113, the strike has become quite popular in the weekly Nov 6 series. Currently, 7,203 call contracts and 1,085 put contracts are open at this strike. That said, another 5,236 puts also reside at the out-of-the-money $110 strike, underscoring a cautious note ahead of Disney’s report.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
