A lack of a dovish tone from Federal Reserve Board Chair Janet Yellen sent global markets scurrying lower in overseas trading. Wall Street is headed in the same direction this morning, following Asian markets and oil sharply lower. Yellen is back in the spotlight today, as she is set to speak before the Senate Banking Committee later this morning.
U.S. stock futures are hemorrhaging heading into the open this morning. At last check, futures on the Nasdaq Composite had plunged 1.93%, while Dow Jones Industrial Average futures were down 1.71% and S&P 500 futures were lower by 1.72%.
Equity option volume was well below average on Wednesday, with traders seeking protection outside the options pits. On the CBOE, the single-session equity put/call volume ratio continued higher for a second day, arriving at 0.78. The 10-day moving average extended its current uptrend to five days, coming to rest at 0.76.
In equity options news, Twitter Inc (NYSE:TWTR) is trading sharply lower Thursday morning in the wake of disappointing user growth and guidance. Elsewhere, Tesla Motors Inc (NASDAQ:TSLA) missed fourth-quarter expectations, but the stock is rallying this morning on strong guidance. Finally, Cisco Systems, Inc. (NASDAQ:CSCO) is also trading higher ahead of the open due to better-than-expected earnings and a bump in share-buybacks and dividend payouts.
Twitter Inc (TWTR)
TWTR stock rallied more than 4% heading into last night’s report. But those bullish aspirations were dashed after the close. Twitter reported better-than-expected fourth-quarter results, but monthly active user growth was flat and revenue guidance came in well below expectations. The shares initially plunged 14% following the report, but TWTR has recovered a bit ahead of the open, trading down about 9% at last check.
Options traders appeared to have bullish aspirations for TWTR ahead of last night’s trip to the earnings confessional. Total volume came in well above average at 526,000 contracts, with calls snapping up 59% of the take. Prior to Wednesday’s activity, TWTR puts had accounted for the majority of daily activity.
Levels to watch for the weekly Feb. 12 series include the $14 strike, where 7,782 put contracts currently reside. On the call side, the next potential sticking point arrives at the $15 strike, which sports OI of 4,800 contracts. With TWTR down sharply preopen, however, a trip to $15 before Friday’s close seems unlikely.
Tesla Motors Inc (TSLA)
In a near perfect mirror of Twitter, TSLA stock dropped more than 3% on Wednesday, only to rally roughly 4% in the wake of Tesla’s fourth-quarter report. While Twitter beat expectations and guided lower, Telsa missed expectations but offered up stellar guidance. The company posted a loss of 87 cents per share on revenue of $1.75 billion, compared to expectations for a profit of seven cents per share on sales of $1.78 billion.
However, guidance was the key for Tesla. The company said it expects deliveries of 80,000 to 90,000 new Model S and Model X cars in 2016, and announced that the Model 3 would be unveiled in March.
On the options front, TSLA puts were front and center on Wednesday. Total volume came in at nearly 395,000 contracts, with typically bearish puts accounting for 60% of the overall take.
TSLA is bucking the overall selloff in the market this morning, but the stock appears unlikely to test overhead resistance at $150, where 1,069 calls contracts reside in the weekly February series. As for support, the next major accumulation of put OI resides at the $140 strike, totaling 4,034 put contracts. Unless TSLA gives way to broader market pressures, look for the shares to hold their ground above $145.
Cisco Systems, Inc. (CSCO)
Networking giant Cisco offered up a surprisingly strong quarterly report after the close last night. Cisco posted a profit of 57 cents per share on revenue of $ 11.93 billion, beating Wall Street’s expectations for earnings of 54 cents per share on sales of $11.75 billion. Cisco also added $15 billion to its share repurchase program and increased its dividend to 26 cents per share.
Options traders were divided heading into the report. Overall volume on Wednesday totaled roughly 259,000 contracts, with activity nearly split down the middle between puts and calls.
Heading into the open, CSCO stock is trading up about 5%, placing the stock north of $23.50. While this places the shares above some 6,600 calls at the weekly February 12 series $23.50 strike, there are still nearly 9,300 calls open overhead at the $24 strike. Support, meanwhile, rests at $22.50 in the form of nearly 10,600 open put contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
