U.S. stock futures are pointing toward a choppy trading session Tuesday, as traders make their final preparations for the holiday break.
The Santa Claus rally could be called into question, as Wall Street appears a bit apprehensive ahead of third-quarter U.S. GDP figures set for release later Tuesday morning.
Elsewhere, crude futures have regained some of Monday’s losses, adding roughly 0.34% to trade north of $36 per barrel ahead of the open.
As for the major market indices, U.S. stock futures on the Dow Jones Industrial Average were last seen lower by 0.03%, with S&P 500 futures down 0.01% and Nasdaq Composite futures down 0.12%.
Options activity fell off sharply on Monday compared to Friday’s blistering session. However, calls were once again in favor, with the CBOE single-session equity put-call volume ratio falling to multi-week lower of 0.64. The 10-day moving average also dipped, arriving at 0.72.
In equity options activity, Apple Inc. (NASDAQ:AAPL) call volume continued to wane on Monday after news broke that the company is slashing iPhone prices in India to boost flagging sales.
Meanwhile, Netflix, Inc. (NASDAQ:NFLX) drew conflicting options activity after David Einhorn shared a chart with Business Insider detailing falling analyst earnings estimates.
Finally, Microsoft Corporation (NASDAQ:MSFT) calls are red hot after the company was on the receiving end of two bullish research notes in the past week.
Apple Inc. (AAPL)
If you have been following along with my morning Vitals reports, you are well aware of growing analyst concern for slowing Apple iPhone sales. News on Monday continued that narrative, as reports surfaced that Apple slashed iPhone 6 and 6s prices by 15% in India, while iPhone 5 prices were cut nearly in half. The move comes after Apple saw a significant drop in fourth-quarter demand in India.
Option volume on AAPL came in just above average on Monday, with nearly 1.3 million contracts crossing the tape. That said, call volume continued to decline, accounting for just 59% of the overall total, compared to AAPL’s usual call total in the 62% to 64% range.
Looking at holiday week options activity, AAPL options traders have taken a keen interest in the weekly Dec. 24 series $110 strike. This out-of-the-money option is home to peak OI, with some 23,530 contracts currently open. Arriving at a distant second is the $104 put, where 13,982 contracts reside.
AAPL breached key support at $110 on Friday, and the area could pose a significant headwind for the shares through the end of the year.
Netflix, Inc. (NFLX)
The bears are once again beating the war drums on NFLX stock. The shares have shed more than 14% since hitting a fresh all-time high of $133.27 on Dec. 7, feeding into the already large contingent of bears betting against the stock. On Monday, Greenlight Capital founder David Einhorn (no relation to Ray Finkle), shared a chart with Business Insider detailing the bear’s main case against Netflix.
Essentially, Wall Street earnings estimates fall after every Netflix quarterly report due to increased spending on new content. NFLX bears have been saying that Netflix’s spending habits are unsustainable for quite some time, and Einhorn’s chart drives that point home.
NFLX options traders, who had been growing more call hevy in recent weeks, appeared to take Einhorn’s chart under consideration. Volume came in above average for NFLX at 245,270 contracts, with put volume climbing to account for 44% of the day’s take. Put volume had been lingering in the sub-40% range in recent weeks.
Turning our attention to more immediate NFLX option activity, the shares are staring up at a potential hurdle at $118, with some 4,452 calls residing at this strike in the weekly Dec. 24 series. Peak put OI, meanwhile totals 2,537 contracts at the $115 strike.
NFLX has bounced around the $120 region since mid-December, although a clear area of support has yet to emerge. In other words, the shares could still have some downside ahead before NFLX finally stabilizes.
Microsoft Corporation (MSFT)
Analysts are beginning to take note of MSFT once again. On Friday, Goldman Sachs issued a rare reversal of opinion, upgrading MSFT to “neutral” from “sell” stating that they “failed to appreciate” the promising signs in Microsoft’s cloud business. Then, on Monday, MSFT was targeted by a rather bullish write-up in Barron’s.
While MSFT stock has not gone “gangbusters,” the shares have steadily fought their way past long-term resistance at $55 over the past several weeks. What’s more, options traders are taking note. On Monday, volume came in at 150,190 contracts, with calls raking up 59% of the take.
Don’t expected MSFT to stray too far from $55 any time soon, however. The strike is home to heavy option OI in the weekly Dec. 24 series, with 5,572 calls and 2,127 puts currently in residence.
There are also more than 2,000 calls and puts at this strike in the weekly Dec. 31 series, meaning that MSFT could have a fight on its hands through the end of the year.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
