U.S. stock futures are trading broadly higher in premarket trading Friday morning, as a surge in Asian trading and a 4% spike in crude oil prices gave wings to the energy sector. European Central Bank President Mario Draghi provided an additional boost after hinting heavily that more stimulus could be on its way from the ECB in March.
Heading into the open, futures on the Nasdaq Composite have gained 1.69%, with S&P 500 futures up 1.36%, and Dow Jones Industrial Average futures up 1.24%.
In options activity, volume came in slightly above average on Thursday, with puts gaining a firmer foothold amid yesterday’s early session selling pressure. Over on the CBOE, the single-session equity put/call volume ratio rose to 0.69, with the 10-day moving average holding at 0.85.
In equity options news, call volume is faltering on Apple Inc. (NASDAQ:AAPL) as the company’s quarterly report draws near. Meanwhile, Netflix, Inc. (NASDAQ:NFLX) went from hero to zero after investors finally had time to digest the company’s quarterly earnings report, and Starbucks Corporation (NASDAQ:SBUX) topped earnings expectations, but missed on guidance.
Apple Inc. (AAPL)
The time is drawing nearer for one of the most anticipated corporate earnings reports of the season. Apple will step up to the plate next week, and Wall Street will be looking for a profit of $3.23 per share on $77.32 billion in revenue. However, if you’ve watched the headlines during the past quarter, you know that iPhone unit sales will be the most significant driver for AAPL stock.
Judging by recent options activity on AAPL, speculative traders appear to be losing their nerve when it comes to a positive post-earnings reaction. Specifically, calls as a percentage of daily volume have declined steadily during the past month, dropping to 56% of Thursday’s roughly 1 million contracts traded. AAPL has historically seen call volume average 62%-63% of its daily activity.
That said, those call traders holding positions on AAPL are aiming high for next week’s quarterly report. Peak call open interest for the weekly Jan 29 series totals 45,121 contracts at the out-of-the-money $100 strike. Peak put OI, by comparison, numbers just 9,087 contracts at the $90 strike.
Netflix, Inc. (NFLX)
Initially, NFLX stock rallied sharply in the wake of the company’s quarterly earnings report, as earnings, revenue and subscriber growth all topped expectations. After digesting the finer points of Netflix’s report, however, many traders took the opportunity to sell. Among the many red flags cited as a drag on NFLX yesterday, U.S. market saturation and a $2 hike in subscription fees attracted the most attention.
NFLX options traders also reversed course. While calls won the popularity contest on Wednesday, puts were the clear choice on Thursday. Overall, volume came in at roughly 464,000 contracts, with puts snapping up 52% of the day’s take.
That said, NFLX is looking to bounce back this morning, with the shares up more than 2% to retake the $105 level heading into the open. Reclaiming $105 today would be a coup for NFLX bulls, as the strike is home to heavy put and call OI– more than 3,000 contracts each.
Starbucks Corporation (SBUX)
After jumping nearly 4% on Thursday, SBUX stock is headed for a reversal this morning. The shares are down more than 2.5% in premarket trading after the company’s second-quarter and full-year guidance came up short of expectations. If not for stronger-than-expected first-quarter results, the situation could be worse, however.
Specifically, Starbucks said first-quarter earnings came in at record $1.1 billion on revenue of $5.37 billion. Adjusted earnings came to 46 cents per share, which topped expectations by a penny. However, SBUX projected second-quarter profits of 38 to 39 cents per share versus expectations of 40 cents, and 2016 earnings of $1.87 to $1.89 per share compared to the Street’s target of $1.89.
With SBUX trading just below $58 heading into the open, traders should keep a close eye on how the shares react to the 2,890 puts currently in residence at this strike in the weekly Jan 22 series. Support, meanwhile, should emerge near $57, with 5,766 puts open at this strike, should the situation get any worse on the open.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
