A move by China’s central bank to stem selling pressure failed to assuage global traders on Tuesday. China reportedly used state funds to buy equities and regulators extended a selling ban on major investors into next week.
Wall Street isn’t buying, however, as U.S. stock futures on the Dow Jones Industrial Average are off 0.66% heading into the open, followed by S&P 500 futures, down 0.65%, and Nasdaq Composite futures, off 0.63%.
Options activity was hot and heavy on Monday, as traders sought out protection against the rising tide of red washing over Wall Street. Puts gained significantly in popularity amid the selloff, with the CBOE single-session equity put/call volume ratio jumping to a reading of 0.8. The 10-day moving average held at 0.69.
Turning to equity option news, Facebook Inc (NASDAQ:FB) saw a flood of mixed options activity after the company announced it would soon start taking pre-orders for its new Oculus Rift headset. Elsewhere, Amazon.com, Inc. (NASDAQ:AMZN) saw a slight bullish mix of activity after separate analysts issued both a bullish research note and a downgrade. Finally, Alibaba Group Holding Ltd (NYSE:BABA) calls were popular despite the stock getting pounded amid heavy pressure on Chinese stocks.
Facebook Inc (FB)
Facebook announced on Monday that, despite not having a firm launch date for the device, it would begin taking preorders for its Oculus Rift VR headset starting Wednesday, Jan. 6. Oculus co-founder Palmer Luckey will also be taking part in a Reddit AMA that morning to answer more questions regarding the device. In response to the news, Piper Jaffray speculated on a March launch date in a bullish research note on the company.
FB stock option activity was brisk on Monday, with 708,160 contracts trading on the issue. While the activity was not as bullish as Facebook is used to seeing, calls still accounted for 58% of the day’s take.
Like most stocks, FB is currently trading south of all major put and call open interest in the Jan 8 series Traders keeping an eye on FB’s short-term prospects should pay close attention to the $102 strike, which is home to 3,398 calls and 6,125 puts in the Jan 8 series. With FB set to bounce around in the $100-$102 range today, support and resistance here could be key for the shares.
Amazon.com, Inc. (AMZN)
Amazon stock took a 5.75% beating on Monday after analysts at Vetr cut the shares from “buy” to hold.” The downgrade apparently held more sway amid the market selloff than the rather bullish research note issued by Stifel, which forecast that Amazon would be the top logistics company in the work in the next 10 years.
AMZN option activity was a bit more bullish than usual on Monday. Overall, volume came in at 292,238 contracts, with calls taking up 57% of the total activity. Call volume for AMZN typically runs in the sub-55% range.
With Amazon dropping below $640 on Monday, the shares are now trading below any meaningful accumulation of Jan 8 series puts or calls, at least until the $600 strike, where 1,185 puts currently reside. That said, if AMZN falls to test support at $600, the stock has more concerns to contend with than the potential for put options support.
Alibaba Group Holding Ltd (BABA)
Guilt by association plagued BABA stock on Monday, as the China-based Internet giant plunged more than 5.6% on Monday in sympathy with the selloff in Chinese stocks. The shares had shown great staying power toward the end of 2015, with Alibaba bouncing between support at $80 and resistance at $85 since November. Now, however, BABA has not only breached support at $80, but it’s trading south of their 200-day moving average.
Monday’s option volume reflected a bit of optimism among BABA traders. Volume came in at a near-term high of 282,394 contracts, with calls snapping up 64% of the take. As for short-term OI levels of interest, BABA has potential support at $76 in the Jan 8 series, with 1,068 contracts in residence. Below that, however, there is nothing significant until the $70 strike, where 1,393 contracts are currently open.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
