U.S. stock futures have reversed early gains and are headed sharply lower Monday morning.
Plunging crude oil prices are once again the culprit, with oil slipping below $35 per barrel on falling demand and a supply glut. At last check, U.S. stock futures on the Nasdaq Composite are down 0.34%, while futures on the S&P 500 are lower by 0.27% and futures on the Dow Jones Industrial Average were last lower by 0.33%.
Options volume is ramping up as we head into the Christmas holiday break. With light activity expected for most of next week, volume crept steadily higher last week.
On Friday, the CBOE single-session equity put/call volume ratio rose to a reading of 0.92, as puts have gained considerable favor amid the recent turmoil on Wall Street. As a result, the 10-day moving average hit a multi-week high of 0.75.
Looking at equity options activity, Apple Inc.’s (NASDAQ:AAPL) above average volume on Friday should carry over into Monday’s trading following a deal with Taylor Swift and iPhone concern from JPMorgan.
Elsewhere, Facebook Inc (NASDAQ:FB) is readying Facebook at Work, which could pose a challenge to LinkedIn Corp (NASDAQ:LNKD), and Netflix, Inc. (NASDAQ:NFLX) deals with troubles over global content rights as it goes all in on original content.
Apple Inc. (AAPL)
AAPL stock saw option volume soar to above average levels on Friday, as nearly 1.9 million contracts changed hands on the purveyor of iPhones. Despite the stock’s roughly 2.6% decline on the session, calls still held the upper hand, accounting for 54% of Friday’s total volume.
Looking ahead to this week, AAPL is in for a mixed session Monday following a pair of conflicting reports. On one hand, Apple has signed an exclusive streaming deal with notorious anti-streaming activist Taylor Swift for rights to her “1989″ world tour. The concert will be available beginning Dec. 20.
On the other hand, JPMorgan has joined the ranks of brokerage firms warnings that the iPhone 6s is showing signs of weakness. Specifically, Narci Chang called out weak iPhone 6s sales in November, and warned that the risk could extend into the first quarter of 2016.
Returning to AAPL options activity, open interest levels to watch this week include the Dec $110 put, where 42,772 contracts are currently open. The $110 strike is also key support for AAPL, and a breach could indicate a continued selloff. Meanwhile, heavy call OI currently rests well out-of-the-money at the Dec $115 strike, totaling 59,890 contracts.
Facebook Inc (FB)
Facebook is finally looking to hone in on LinkedIn’s professional social media territory. The social media giant is reportedly readying the launch of its new service, Facebook at Work. While the service will overlap with its main Facebook website, online games and other less professional aspects of regular Facebook will be notably absent.
Option volume was impressive for FB stock on Friday, with nearly 800,000 contracts changing hands on the issue. Taking a closer look, call activity was notably lacking among the typically bullish FB options contingent, with calls only accounting for 58% of Friday’s take.
Turning to December’s OI configuration, the $100 strike will be key for FB options traders. The century mark is home to some 16,800 put contracts and 14,870 call contracts, making it a potentially key inflection point for FB stock. Meanwhile, the $105 strike could create resistance for FB on any rally, with some 61,380 call contracts currently residing at this overhead strike.
Netflix, Inc. (NFLX)
When faced with difficulty securing rights to global content distribution, Netflix decided to double down on creating original content. The move, however, is being seen as a double-edged sword for NFLX. While the company has performed will with original content, the cost of upping its original programming from 16 shows to 31 in 2016 has many investors worried about Netflix’s bottom line.
As a result, put volume has begun to ramp up again on NFLX stock. On Friday, volume soared to nearly 450,000 contracts, with puts accounting for 55% of the day’s take.
As for December options, peak OI still lies with the bulls as 13,666 calls are currently open at the overhead $120 strike. Puts, however, are gaining considerable traction at the $110 strike, with OI rising to 11,809 contracts as of Friday’s close.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
