U.S. stock futures are pointed higher for the second day in a row, as Wall Street waits for the Federal Open Market Committee’s official decision on U.S. interest rates.
Commodities and energy stocks led the way higher yesterday, and the U.S. dollar wafted up Wednesday morning, with the Federal Reserve Board Chair Janet Yellen expected to unveil a rate hike at 2 p.m. EST.
At last check, U.S. stock futures on the Dow Jones Industrial Average were up 0.45%, while futures on the S&P 500 were up 0.38% and the Nasdaq Composite was was up 0.37%.
Options activity set a blistering pace on Tuesday, with volume outstripping the average for the past month. Over on the CBOE, the single-session equity put-call volume ratio rose slightly to 0.66, as a hint of caution tinged Tuesday’s activity. The 10-day moving average held at 0.75.
It should come as no surprise that most of Tuesday’s most active stock options are centered around today’s Fed interest rate decision. Commodities and banking stocks were among the most popular, with beaten down natural resources firm Freeport-McMoRan Inc (NYSE:FCX) attracting a veritable flood of put volume yesterday as commodities prices edged higher.
Elsewhere, Facebook Inc (NASDAQ:FB) calls were back in focus after reports revealed FB stock position increases by a pair of hedge funds. And the hits kept coming for Twitter Inc (NYSE:TWTR), after Evercore ISI cut its price target on the shares.
Freeport-McMoRan Inc (FCX)
Commodities prices edged higher across the board on Tuesday, and precious metals (including copper) are trading higher in pre-market activity this morning ahead of this afternoon’s Fed rate announcement.
Higher commodities and energy prices bode well for Freeport-McMoRan, and FCX stock is looking to add another 1% today after rallying as much on Tuesday.
Looking at Tuesday’s options activity, it appears that either FCX bears are doubling down on the stock, or bulls are hedging long positions. FCX option volume spiked to a short-term record 398,008 contracts yesterday, with puts accounting for a whopping 81% of the day’s take.
Zooming in for a look at soon-to-expire December options reveals that peak put open interest totals 12,552 contracts at the in-the-money $8 strike. Meanwhile, peak OI numbers 24,140 contracts at the Dec $9 strike call, with another 20,096 calls open at the $7.50 strike.
Facebook Inc (FB)
FB stock is apparently in vogue again with the hedge fund community. In recent filings with the SEC, both Perigon Wealth Management and Saturna Capital announced that they had increased their FB holdings. Perigon upped its position by 0.6% in the third quarter, while Saturna boosted its position by 32.4%.
Options activity was brisk for FB on Tuesday, but the overall composition of activity was par for the course for the stock. Some 321,202 contracts changed hands on FB yesterday, with calls holding firm at 66% of the day’s take.
As for expiring December OI, FB stock is currently perched on the $105 strike, which is home to both heavy call OI (63,349) and heavy put OI (44,909).
That said, after today’s Fed announcement, FB has an excellent chance of breaking away from this options gravity well. Upside may be limited by the $110 strike, where 66,178 contracts reside, while support should emerge at $100.
Twitter Inc (TWTR)
TWTR stock can’t get a break this week. On Monday, the microblogging social media site lost its VP of Design. On Tuesday, Evercore ISI cut its price target on TWTR stock to $22 from $25 per share after issuing a bearish report stating that people are spending less time using Twitter, opting instead for Snapchat and Facebook’s Instagram.
TWTR stock was smacked for a loss of nearly 4% on Tuesday, but options traders decided to double down on calls instead. Overall volume swelled to 257,820 contracts, with calls accounting for 79% of the take.
TWTR is now hovering near $24, and the shares are staring up at heavy call (18,877) and put (17,593) OI at the $25 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
