Wall Street is looking to regain some of Friday’s losses on Monday morning, as traders gain inspiration from a rally in Asian and European stocks. Specifically, reports of slower economic growth in China have many believing that more stimulus is on the way. Heading into the open, futures on the Nasdaq Composite are up 1.68%, with S&P 500 futures up 1.63% and Dow Jones Industrial Average futures adding 1.64%.
Equity option volume was quite brisk on Friday, as the options pits were inundated with January-expiration activity and corporate earnings speculation. Overall, puts dominated the CBOE, as the single-session equity put/call volume ratio surged to 1.14, dragging the 10-day moving average edged higher to 0.86.
Equity option news is all about earnings this morning. Headlining the rising tide volume in the options pits is perennial tech favorite Apple Inc. (NASDAQ:AAPL), which is slated to release its fiscal first-quarter earnings report after the close next Tuesday. Arriving a week ahead of Apple, Netflix, Inc. (NASDAQ:NFLX) will slip into the earnings confessional after the close this afternoon. Finally, Intel Corporation (NASDAQ:INTC) has already felt the sting of a poorly received report, after margin concerns sunk the shares on Friday.
Apple Inc. (AAPL)
With just more than a week until Apple’s quarterly report, options traders flooded AAPL stock option activity. Nearly 2.5 million contracts changed hands on AAPL on Friday, with calls attracting a below-average 60% of the day’s take.
Heading into the report, options traders have set their sights on the $100 mark, with 6,553 calls and 7,557 puts open at this overhead strike in the weekly Jan 26 series. That said, peak put OI for the series totals 8,606 contracts at the out-of-the-money $95 strike.
Currently, weekly Jan 26 series implieds are pricing in a potential post-earnings move of about 8.8%, placing the upper bound near $104 and the lower bound at $89. Wall Street has set its sights on earnings of $3.24 per share on revenue of $77.32 billion, though iPhone sales and guidance will likely trump baseline figures.
Netflix, Inc. (NFLX)
NFLX stock could be in for a big move tomorrow, at least if options traders are to be believed. Weekly Jan 22 implieds are currently pricing in a potential move of about 13.8%, placing the upper bound at $118.39 and the lower bound at $90. And judging from activity in the options pits on Friday, speculators are leaning toward a downside move.
Specifically, some 605,000 contracts traded on NFLX on Friday, hitting a near-term high for option volume on the equity. What’s more, puts were the investment vehicle of choice, raking in 54% of the day’s take.
These bearish speculators have set their sights on the century mark, with 3,198 puts currently open at the weekly Jan 22 $100 strike. Peak call OI for the series, meanwhile, numbers 3,851 contracts at the deep out-of-the-money $120 strike.
Taking a look at the numbers, the consensus is expecting a profit of 2 cents per share on revenue of $1.83 billion. That said, guidance and subscriber growth will be the key metrics for NFLX stock, as expanding into 130 countries throughout 2016 is certain to have some unexpected expenses.
Intel Corporation (INTC)
Finally, Intel is a prime example of meeting expectations, but disappointing investors. On Friday, Intel put up Street-beating earnings of 74 cents per share on sales of $14.9 billion. However, the company warned that margins could fall more than 6% due to a weak PC market and costs related to its acquisition of Altera.
INTC stock responded by plummeting more than 9% in response to the report, driving higher-than-usual put activity on the shares. Overall, volume came in at roughly 490,000 contracts on Friday, with puts snapping up 55% of the take. For the weekly Jan 22 series, peak put OI totals 1,486 contracts at the in-the-money $31.50 strike, while peak call OI numbers 2,326 contracts at the out-of-the-money $34.50 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
