Wall Street is continuing to take its cues from oil prices this week, as U.S. stock futures are following oil prices lower this morning. Crude futures dropped 2.5% yesterday after weekly U.S. petroleum supplies showed an unexpected rise. Following 1% across-the-board gains on Tuesday, U.S. stock futures on the Dow Jones Industrial Average are down 0.19% in premarket trading, followed by S&P 500 futures, off 0.14%, and Nasdaq Composite futures, down 0.06%.
Options volume has seen some whipsaw activity heading into 2016, even as overall volume rises to above-average levels. Specifically, the CBOE single-session equity put/call volume ratio plunged to a reading of 0.54, near an annual low, on Tuesday after soaring to an annual peak of 1.21 on Monday. The 10-day moving average, which smooths out such volatility in call and put trading, settled lower at 0.68.
In equity news, Amazon.com, Inc. (NASDAQ:AMZN) volume popped following speculation that a deal with Prime Now partner Sprouts Farmers Market Inc (NASDAQ:SFM) could boost online retail growth by 20%. Elsewhere, Netflix, Inc. (NASDAQ:NFLX) bears are beating the war drums once again, citing declining earnings estimates and increased competition. Finally, after rallying on the potential for fundraising, SunEdison Inc (NYSE:SUNE) stock fell after analysts expressed concerns over the cost of said fundraising.
Amazon.com, Inc. (AMZN)
AMZN stock has been hot in 2015, with the stock’s 120%-plus year-to-date gain, putting it among the top three best performing stocks in the S&P 500. While some brokerage firms are calling for profit taking, analysts at Detwiler Fenton & Co. said the company could see online retail growth of 20% due to Prime Now deals with companies like Sprouts.
Sprouts, a natural and organic grocery foods store, is already part of Prime Now in Los Angeles, and is currently testing in additional markets.
In a related note, Amazon announced that it saw more than 3 million users joined Amazon Prime Now in December.
Options activity for AMZN came in well above average on Tuesday, with 292,478 contracts changing hands. Calls were the most popular options, accounting for 56% of AMZN’s total take on the session. Looking at weekly Dec 31 series open interest, the $700 strike has received the most attention recently, attracting more than 4,600 call contracts — which could potentially reinforce technical resistance already in the region. Peak put OI, meanwhile, numbers just 1,931 contracts at the $680 strike.
Netflix, Inc. (NFLX)
Despite being the best performing stock on the S&P 500 — Netflix is sitting on a year-t0-date gain of more than 140% — NFLX is once again seeing a resurgence of bearish sentiment. Echoing the oft-cited “declining earnings estimates and increasing competition,” many analysts are recommending taking profits or outright betting against Netflix stock. In fact, over on CNBC’s Fast Money, analyst Carter Worth said he believes that traders should take profits in NFLX, or possibly even short the stock at this point.
Judging by Tuesday’s activity, short-term options traders weren’t buying into the message yesterday. Overall volume surged to 230,188 contracts, with calls snatching up 58% of the take. Headway may be hard to make this week, however, as NFLX is staring up at multiple levels of heavy call OI in the Dec 31 series. Specifically, there are 3,240 contracts at $119, 4,955 contracts at $120, and 3,686 contracts at $123.
As such, traders may want to consider writing covered calls through the end of 2015, with an eye toward put protection, or married puts for increasing your holdings, heading into January.
SunEdison Inc (SUNE)
When we last looked at SUNE, the stock had popped almost 9% after SunEdison that it had all but secured $650 million in funding via a second lien. But analysts and shareholders finally got their hands on the details and raised concerns regarding the costs of such a funding deal. In fact, SunEdison engaged in a public row with a shareholder while UBS analyst Julien Dumoulin-Smith expressed concern about the costs of raising funds in this manner.
Despite the plunge and rising bearish sentiment, options traders remained focused on SUNE calls. Overall volume on Tuesday rose to 126,104 contracts, with calls accounting for 62% of all activity. The $5.50 Dec 31 series call is now the strike to watch for SunEdison traders, with OI totaling 6,944 contracts. Meanwhile, the $5 put could be a bigger concern for SUNE, with 3,900 contracts currently open at this weekly out-of-the-money strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
