It’s official. Chinese stocks have entered bear-market territory. Heavy losses in China coupled with sub-$30-per-barrel oil have driven U.S. stock futures sharply lower across the board. Chinese officials said they dumped $15 billion into the market to bolster liquidity, but the Shanghai Composite still plunged 3.55%.
Heading into the open in New York, futures on the Nasdaq Composite are down 1.7%, with S&P 500 and Dow Jones Industrial Average futures both off 1.5%.
Equity option volume was strong on Thursday, as a rebound on Wall Street and a slew of corporate earnings reports drove speculation in the options pits. Overall, the CBOE single-session equity put/call volume ratio slipped to 0.8, while the 10-day moving average edged higher to 0.82.
In equity option news, Twitter Inc (NYSE:TWTR) saw a spike in call volume after Deutsche Bank reiterated the stock with a “buy” rating and a bullish note. Exxon Mobil Corporation (NYSE:XOM) saw a brief spike in bullish call activity after analysts speculated that oil prices may have finally stabilized. Finally, Hertz Global Holdings Inc (NYSE:HTZ) made a rare appearance on the top 10 most actives list after Amerigo Asset Management boosted its stake in the company by 49%.
Twitter Inc (TWTR)
Beaten down TWTR stock may be the contrarian play of the year, according to analysts at Deutsche Bank. The brokerage firm reiterated its “buy” rating and $40 price target on TWTR, noting that the stock is at the top of its “highly-speculative contrarian long idea” list for 2016. Currently, TWTR sports 17 buys, 24 holds and three sells with a consensus price target of $33 per share.
Options activity on TWTR was brisk on Thursday, with volume arriving at a record 687,552 contracts on the day. Calls made up the bulk of yesterday’s activity, accounting for 81% of the day’s take. Looking ahead to weekly January 22 OI, traders will want to keep an eye on the $18.50 strike, where 1,232 calls and 468 puts are currently open. TWTR is currently trading well below all other major OI strikes in both the January and February options series.
Exxon Mobil Corporation (XOM)
XOM stock came roaring back on Thursday, with the shares jumping 4.5% on hopes that oil prices would stabilize near $30 per barrel. Analysts at Deutsche Bank said that we’d probably already seen the worst for oil prices, providing additional lift for XOM on the day. Unfortunately, oil futures aren’t cooperating this morning, and the lead contract has breached the $30 mark, sending XOM down nearly 3% in premarket trading.
Options traders were not as enthusiastic, as puts were the investment vehicle of choice for XOM traders on Thursday. Total volume came in at 422,982 contracts, with puts accounting for 58% of that activity. Looking ahead to next week, traders are focused on the $73.50 strike, where 5,156 put contracts are open in the weekly January 22 series. Peak call OI for the series totals 8,651 contracts at the out-of-the-money $82.50 strike.
Hertz Global Holdings Inc (HTZ)
Institutional action appears to have driven record option volume for HTZ stock on Thursday. According to its most recent 13F filing with the SEC, Amerigo Asset Management bumped its stake in HTZ by 49% to roughly 7.8 million shares. HTZ is now Amerigo’s 7th largest position among the company’s total holdings of roughly $111.4 million.
Option volume for HTZ soared to 361,386 contracts on Thursday, with action split nearly evenly between calls and puts on the session. Taking a look at Jan 22 series OI, HTZ has a wealth of overhead call OI to overcome. With the shares hovering near $10, HTZ is trading below 2,520 call contracts at the $11 strike, with another 1,519 at the $11.50, 2,657 at the $12, and 2,818 at the $12.50 strikes.
With HTZ trading at its lowest levels since 2012, a rebound here could go a long way to bolstering sentiment on the shares.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
