U.S. stock futures are pointing toward a positive open this morning, as Wall Street feed’s on Wednesday’s late-session gains. Traders pushed stocks higher after minutes from the latest Federal Reserve’s policy meeting arrived more dovish than expected, reigning in expectations for a December rate hike.
Heading into the open, futures on the Nasdaq Composite were up 0.32%, futures on the Dow Jones Industrial Average were higher by 0.18% and the S&P 500 Index was up 0.29%.
Option volume pulled back to seasonal levels on Wednesday, as activity in General Electric Company (NYSE:GE) options cooled from Tuesday’s heated pace. On the CBOE, the single-session equity put-call volume ratio fell to 0.72, as call activity ramped up ahead of tomorrow’s November option expiration. The 10-day moving average held at 0.75.
On the equity options front, Apple Inc. (NASDAQ:AAPL) calls are on the rise after strong earnings from iPhone supplier Foxconn indicated strong third-quarter growth for the popular smartphone. Meanwhile, Qualcomm, Inc. (NASDAQ:QCOM) attracted unusual call activity after the company was charged with violating South Korea’s competition laws.
Finally, Pfizer Inc. (NYSE:PFE) drew heavy put volume after reports surfaced that the company may be nearing a deal to acquire Allergan PLC (NYSE:AGN) for roughly $380 per share.
Apple Inc. (AAPL)
AAPL stock rose more than 3% on Wednesday, after key iPhone supplier Foxconn reported strong quarterly revenue and earnings.
While Foxconn provided no specific data, analysts believe the company’s financial data suggests that iPhone production is growing at about 7% year-over-year, indicating a strong quarter for Apple’s flagship device.
AAPL’s Wednesday options activity came in just above average compared to the past three weeks. Some 741,000 contracts changed hands, with calls accounting for 66% of the overall take.
Looking at tomorrow’s November options expiration, AAPL should have little trouble until hitting the $120 level. Currently, the Nov $120 strike is home to 77,583 call contracts and 15,723 put contracts, meaning that the area could provide options related resistance to any rally heading into the weekend.
Qualcomm, Inc. (QCOM)
QCOM stock plunged nearly 9.5% on Wednesday, as traders reacted to news that Qualcomm is facing charges for violating South Korea’s competition laws. The company has been threatened with antitrust suits before, but Qualcomm has never actually been charged with a violation until now. The company assured investors that the claims were baseless, but the the denial did little to assuage QCOM investors.
In light of the charges, QCOM options traders turned to call options. Volume on the stock swelled to 170,210 contracts, with calls accounting for 62% of the day’s take. Whether these calls represent hedges for fresh short positions or bets that QCOM will bounce back from Wednesday’s losses remains to be seen.
As for November expiration tomorrow, traders will want to keep a close eye on the $50 strike, which is home to peak Nov. call OI of 9,326 contracts. Peak put OI, meanwhile numbers 7,358 contracts at the in-the-money $55 strike.
Pfizer Inc. (PFE)
Speculation has been building on Pfizer’s plans on buying Allergan for a while now. On Wednesday, the infamous “people familiar with the matter” reported that Pfizer was in advanced talks, and that a deal could be cut that values Allergan as high as $380 per share, or roughly $150 billion. Should such a deal see the light of day, it would be the largest ever in the industry.
PFE found itself in rare territory on Wednesday, with the shares edging their way onto the top 10 most active options listing. Volume rose to 150,352 contracts, with puts commanding 70% of Wednesday’s traffic.
Taking a peek at soon-to-expire November options reveals that PFE is currently perched on peak put OI of 31,769 contracts. The shares are also looking up at heavy call OI at the $34 strike (40,275 contracts) and the $35 strike (47,659 contracts).
With expiration tomorrow, PFE could remain range bound between $33 and $34 through Friday’s close.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
