Wall Street has already had a rough-and-tumble morning, and official trading is still a ways off. Dow futures have bounced back from triple-digit losses, as traders digest earnings from several blue chips, including Procter & Gamble Co (NYSE:PG) and 3M Co (NYSE:MMM). Data on housing prices and consumer confidence are due later this morning, while Apple Inc. (NASDAQ:AAPL) will report after the close.
Despite enough data on tap to choke a horse, U.S. stock futures are hovering just above breakeven heading into the open. At last check, futures on the Nasdaq Composite were up 0.13%, with S&P 500 futures up 0.21% and Dow Jones Industrial Average futures were essentially flat with a 0.08% gain.
In options activity, volume came in well above average on Monday, as speculation on corporate earnings shifted into high gear. On the CBOE, the single-session equity put/call volume ratio rose to 0.69, while the 10-day moving average continued lower to a two-week low of 0.80.
In equity option news, Facebook Inc (NASDAQ:FB) saw mixed options activity heading into tomorrow’s quarterly report after analysts at SunTrust Robinson Humphrey cut their price target on the shares. Elsewhere, Netflix, Inc. (NASDAQ:NFLX) saw a spike in call volume after NFLX breached $100 for the first time since October. Finally, Twitter Inc (NYSE:TWTR) was downgraded at Stifel Nicolaus in the wake of the company’s executive exodus.
Facebook Inc (FB)
Facebook stock was hit with a round of rare bearish activity on Monday from both the options crowd and the brokerage community. Starting with analyst action, SunTrust Robinson Humphrey reiterated FB stock with a buy rating, but cut its price target to $120 from $125. Wall Street is expecting a profit of 67 cents per share from Facebook after the close tomorrow, with revenue expected to come in at $5.36 billion.
Options activity was also unusually cautious on FB stock. Overall volume came in at an above average 492,530 contracts, with calls accounting for a well-below-average 52% of the take. Typically, FB stock sees call volume make up 62%-63% of daily activity, meaning that Monday’s dip could be a sign of caution ahead of the report.
In premarket action, Facebook is trading up near $97.59, giving the shares some breathing room between them and the more than 5,500 calls open at the Jan 29 series $97 strike. Peak call open interest for the Jan 29 series totals 33,700 contracts at the $100 strike, while peak put OI for the series numbers 27,939 contracts at the deep-out-of-the-money $85 strike — likely a sign of put selling.
Netflix, Inc. (NFLX)
Netflix stock drew an unusual amount of call volume on Monday. Total volume came in at 275,422, which is roughly average for the past month, though call ate up an elevated 61% of the day’s take. NFLX typically sees daily average call volume of less that 55% of total daily activity, hinting at a potentially bullish shift in trading for the stock on Monday.
Technical traders may have been responsible for the increase in calls, as NFLX was mired below the psychologically significant $100 level for most of the session. In fact, NFLX closed below $100 on a daily basis for the first time since late October. The last time NFLX breached this technical level, the shares bounced around the $97-$99 region for nearly a week before going on a sharp tear higher in November.
OI levels to watch for NFLX this week include the Jan 29 series $100 strike put, where 3,411 contracts are currently open. Additionally, the $105 strike call is home to 3,238 contracts, while peak call OI for the series totals 10,588 calls at the deep out-of-the-money $130 strike — likely a sign of call selling.
Twitter Inc (TWTR)
Twitter can’t seem to win for losing. CEO Jack Dorsey tweeted on Sunday that Twitter’s top executives are leaving, a move that while not surprising, does have considerable implications for TWTR stock. Stifel Nicolaus was quick to jump on the news, cutting its rating on TWTR to hold from buy.
Options traders appeared to be a bit more forgiving, as calls accounted for 61% of yesterday’s total volume of 221,778 contracts. TWTR stock set new all-time lows on Monday near $16.50, but the shares managed to clamber back above $17 before the close.
Put support may have played a role in TWTR’s bounce, as there are 3,464 puts at the January 29 series $16 strike, with another 1,800 at $16.50, and roughly 1,600 at the $17 strike. Heavy call OI lies overhead, however, with 3,090 at $17.50 and 5,565 at the $18 strike in the Jan 29 series.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
