Stocks continued their strong start to November on Tuesday, with Wall Street once again hopeful for a delay in tightening of the Fed’s monetary policy. Furthermore, that strength appears to have spilled over into premarket trading this morning, as U.S. stock futures on the Nasdaq Composite, Dow Jones Industrial Average and S&P 500 are all pointing fractionally higher heading into the open.
Option volume rebounded Tuesday, with puts continuing to gain ground. In fact, the the CBOE single-session equity put/call volume ratio rose for the fourth consecutive session, coming in at 0.71. The 10-day moving average continued to hold at 0.66.
On the equity options front, puts gained the upper hand on Tesla Motors Inc (NASDAQ:TSLA) ahead of the company’s third-quarter earnings report. Elsewhere, Facebook Inc (NASDAQ:FB) continued to see brisk options activity heading into tonight’s quarterly report, with weekly Nov. 6 implieds pricing in a potentially significant move. Finally, Intel Corporation (NASDAQ:INTC) was flooded with call volume prior to INTC stock trading ex-dividend today.
Tesla Motors Inc. (TSLA)
Judging from the preference for TSLA puts on Tuesday, the options market was set for a plunge in the stock following last night’s third-quarter earnings report. Some 162,355 contracts traded on TSLA, with puts accounting for 54% of the day’s take. Looking at weekly Nov 6 series open interest, traders were heavily focused on deep out-of-the-money puts, with the $200, $190 and $185 strikes all sporting OI of roughly 5,000 contracts.
While TSLA’s 2.5% dip heading into the report appeared ominous, shares have surged nearly 8% in premarket trading heading into the open. Tesla said it earned 58 cents per share in the quarter, on revenue of $1.24 billion, edging out Wall Street’s expectations on earnings while just missing sales targets.
Guidance will be the key driver for TSLA stock today, however. Tesla lifted its deliveries guidance to 17,000 to 19,000 vehicles, pushing the high end of Wall Street’s expectations for deliveries of 17,000 and pushing the full-year target above the consensus view.
Facebook Inc. (FB)
Facebook will slip into the earnings confessional after the close this afternoon. Call options have been popular on the social media stock, once again accounting for 66% of Tuesday’s total volume of 268,746 contracts. During CNBC’s Fast Money segment yesterday, Dan Nathan pointed out that option implieds are pricing in a potential 6% move in either direction for FB stock, placing the upper bound at $109 and the lower bound at $97.
Taking a closer look at FB’s weekly Nov 6 OI configuration, we find that peak put OI totals 12,638 contracts at the $100 strike, while peak call OI numbers 24,584 contracts at the overhead $110 strike. FB stock is currently trading about 0.5% higher in premarket trading heading into the open.
Intel Corporation (INTC)
INTC stock was awash in call activity yesterday. Volume totaled an above average 380,288 contracts, and calls accounted for 93% of the day’s take. From a short-term perspective, heavy put activity rules INTC’s OI configuration, with 10,734 contracts at the weekly Nov 6 series $34 strike, and another 7,463 contracts at the $33.50 strike.
Instead of bets for an INTC rally, yesterday’s activity looks decidedly like a dividend capture strategy ahead of Intel stock trading ex-dividend. Intel’s ex-div date is today, with shareholders of record by the close eligible for a dividend of 24 cents per share payable on Dec. 1.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
