Stocks are pointed sharply higher this morning, as Wall Street bulls took heart in rallying crude prices. In overseas trading, crude was up more than 3% to trade north of $30 per barrel, providing considerable lift for the Dow. In fact, U.S. stock futures on the Dow Jones Industrial Average were last seen up 1.04%, with S&P 500 futures up 1.06%, and the Nasdaq Composite up 1.1%.
Activity in the options pits was considerably more brisk than usual on Friday, as traders rushed to close out or roll out positions ahead of February’s options expiration. Over on the CBOE, the single-session equity put/call volume ratio jumped to 0.87, erasing a two-day decline in the 10-day moving average, which rebounded to 0.82.
In equity options news, Apple Inc. (NASDAQ:AAPL) continues to wage a very public battle with the FBI, and it’s starting to have an impact on options sentiment. Meanwhile, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was hit by considerably bearish commentary from Wells Fargo, and Twitter Inc. (NYSE:TWTR) continues to see backlash from its failed Moments launch.
Apple Inc. (AAPL)
Apple’s battle with the FBI over iPhone security dominated both the financial and mainstream media headlines last week. The issue even caught the attention of presidential candidates, including Donald Trump, who called for an Apple boycott while tweeting from his iPhone — make of that what you will.
Initially, the added attention was seen as a boon for AAPL stock, but the longer this miasma drags out, it appears to be having the opposite effect on sentiment. Specifically, AAPL call volume fell off markedly on Friday. Total volume came in at 1.3 million contracts, with calls only eeking out 51% of the take. On average, AAPL calls typically account for 62%-63% of daily activity.
Technically, AAPL has a bit of momentum heading into this week, meaning that the shares could challenge short-term resistance near $98 heading into Friday. In the weekly Feb. 26 series, the $98 strike is home to 6,702 contracts, which could create a bit of a headwind for the shares.
Valeant Pharmaceuticals Intl Inc (VRX)
Analysts at Wells Fargo finally weighed in on the struggling Valeant Pharmaceuticals last week, and it wasn’t pretty. The brokerage firm issued an “underperform” rating on VRX stock with a $65-$68 price-target range — well below the stock’s current perch near $85. In an accompanying statement, Wells Fargo said, “Our concerns stem from a number of factors, including opaqueness related to accounting issues, what we see as balance sheet risks.”
With VRX seeing its biggest drop since late December, it’s no wonder that puts were the investment vehicle of choice for the shares. Total volume rose to more than 330,ooo contracts, while puts snapped up 66% of the take.
With VRX hovering just below $85, the shares are trading well below all major call OI strikes in the February series, though peak put OI of 4,966 contracts lies well below the stock at the $75 strike.
Twitter Inc. (TWTR)
Option activity was mixed on TWTR stock on Friday. The stock saw more than 323,000 contracts change hands on the session, with puts nearly in parity with calls on the session. TWTR has been struggling to move higher since mid-February, but resistance in the $19-$20 region has stymied the stock’s rally.
Overall, Twitter has a severe image problem at the moment. The company is hemorrhaging users, and, in the fourth quarter of 2015, Twitter reported that more people left than signed up. What’s more, following the launch of Moments, which was supposed to make using Twitter easier, the company saw a decline of 1.5% in total users.
Looking at this week’s OI configuration, TWTR is facing stiff overhead resistance at $19, with more than 7,100 call contracts open at this strike in the February series.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
