Tuesday’s Vital Data: Apple Inc. (AAPL), Dow Chemical Co (DOW) and Freeport-McMoRan Inc (FCX)

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U.S. stock futures are bouncing back Tuesday morning, driven by a rebound in crude oil prices. Energy stocks have led the market in recent weeks, with volatility in the oil market making waves. In European trading, Brent crude futures were up 0.27% at $36.73. Meanwhile, futures on the Dow Jones Industrial Average were last seen up 0.46%, with S&P 500 futures up 0.40%, and Nasdaq Composite futures had gained 0.48%.

Options activity ramped up on Monday, as traders looked to position themselves ahead of the new year. The above-average volume was dominated by puts, with CBOE single-session equity put/call volume ratio spiking to an annual peak of 1.21 — with puts outnumbering calls on the day. As a result, the 10-day moving average rebounded off a two-month low to come in at 0.69.

Taking a closer look at equity options activity, Apple Inc. (NASDAQ:AAPL) saw call volume return to normal levels despite the fact that AAPL is poised to end its six-year winning streak. Elsewhere, short interest spiked on Dow Chemical Co (NYSE:DOW) as the merger deal with E I Du Pont De Nemours And Co (NYSE:DD) appears to be souring with investors. Finally, Freeport-McMoRan Inc (NYSE:FCX) shares plunged and puts spiked after chairman and founder James Moffett announced he was stepping down.

Tuesday’s Vital Data: Apple Inc. (AAPL), Dow Chemical Co (DOW) and Freeport-McMoRan Inc (FCX)

Apple Inc. (AAPL)

Apple options activity was brisk on Monday, as the stock saw more than 853,000 contracts cross the tape heading into the last week of 2015. More importantly, call volume returned to normal levels for AAPL — after trending in the upper 50% range for the past several weeks, call volume accounted for 63% of the take on Monday.

The odd development here is that this return to calls for AAPL options traders comes just as the stock is set to post its first annual share loss in six years. Apple stock closed out 2014 at $110.38, and the shares are currently hovering near $107 in premarket trading.

While it certainly is possible that AAPL could make up this ground before the end of the week, the shares have several significant hurdles to overcome.

First, technical resistance at the $110 level is significant, as this region previously acted as key support. Additionally, AAPL is staring up at resistance from its 10-day and 20-week moving averages, which are both perched in the area.

Finally, the $110 strike is home to peak weekly Dec 31 series open interest, with 19,609 calls in open interest. There also are another 16,645 calls open at the overhead $109 strike, and 10,561 calls at the $108 strike. Combine this potential for options-related resistance with overhead technical hurdles, and AAPL’s win streak is in serious jeopardy.

Dow Chemical Co (DOW)

Investors have had time to think about the Dow/DuPont merger, and they are beginning to have considerable doubts. While there is still a fair amount of optimism within the analyst community, DOW’s stock price has struggled in recent weeks as investors worry that the goals for the merger’s complex spending cuts may not be realistic.

In addition to the stagnant stock, short sellers flooded DOW during the most recent reporting period. In fact, during this period, the number of DOW shares sold short spiked 78.8% from roughly 16.8 million shares to more than 30 million shares.

Given this data, Monday’s rise in DOW call volume would appear to be a disconnect. Volume for DOW came in at a short-term record 237,814 contracts, with calls making up 86% of the take. However, it is important to remember that calls are often used as hedges for short positions, as well as arbitrage tools for merger and acquisition deals.

From a short-term perspective, DOW is facing some stiff options-related headwinds in the $56 region. In the weekly Dec 31 series, the $56 strike is home to roughly 8,300 puts and 8,300 calls. DOW is currently trading near $52.20.

Freeport-McMoRan Inc. (FCX)

With commodities prices in the dumpster, FCX stock has taken a beating for quite some time.  The situation got even worse on Monday, as chairman and founder James Moffett announced he was stepping down for good. Furthermore, it would appear that the move was initiated by the company’s board of directors.

Following the nearly 10% drop in FCX shares, option volume soared to near-term high levels on the stock. Some 151,396 contracts traded on FCX, with calls and puts split near evenly. Short-term call traders can’t be too happy with the reversal, as some 13,924 calls at the weekly Dec 31 $7.50 strike are now firmly trading out of the money. That said, a rebound this week could benefit the 9,742 calls currently open at the $7 strike, and FCX appears poised to retake this level in today’s trading.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/12/tuesdays-vital-data-apple-inc-aapl-dow-chemical-co-dow-freeport-mcmoran-inc-fcx-options/.

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