U.S. stock futures are pointing toward their third-straight positive open this morning, as Wall Street prepares for the release of minutes from the latest Federal Reserve meeting. (Investors are expecting an increasingly dovish tone from the central bank.) Also on tap are reports on January’s industrial production and capacity utilization.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.61%, while futures on the S&P 500 are higher by 0.68%, and Nasdaq Composite futures are up 0.70%.
Equity option volume was average for a Tuesday, with no major spikes in volume so far in this final week before monthly February options expire. Turning to activity on the CBOE, the single-session equity put/call volume ratio rebounded sharply from yesterday’s two-week low to arrive at 0.80. The 10-day moving average, meanwhile, extended its recent rally to arrive at yet another four-week high of 0.82.
In equity options news, Apple Inc. (NASDAQ:AAPL) made headlines once again yesterday after announcing a multibillion-dollar bond offering as a way to fund dividends and buybacks. Meanwhile, Alibaba Group Holding Ltd (NYSE:BABA) revealed that it quietly snatched up 33 million shares of discount-deal retailer Groupon Inc (NASDAQ:GRPN). Finally, Freeport-McMoRan Inc (NYSE:FCX) appears to be making some headway on its debt obligations after selling a copper mine stake for $1 billion.
Apple Inc. (AAPL)
Apple is readying another massive bond offering, marking its fifth such move since 2013. According to reports, Apple will be conducting the offering in 10 parts, with proceeds to be used for acquisitions, debt repayment and returning cash to shareholders.
Options activity was mixed following the news. While Friday saw a return to call volume for AAPL stock, Tuesday’s session was nearly split. Overall volume total 1.2 million contracts, with calls snapping up only about 52% of the take.
Apple stock is pushing closer to the $97 strike price in premarket trading. The area is a key overhead-resistance point for AAPL, with nearly 15,200 contracts currently in residence in the February series. Additionally, the $97.50 strike sports OI of 13,600 call contracts, though above this strike, there is little in the way of resistance until the century mark, where more than 82,000 calls are currently open.
Alibaba Group Holding Ltd (BABA)
In a move that shocked quite a few on Wall Street, Alibaba revealed that it has acquired 33 million shares of struggling discount retailer Groupon. The move was so quiet that even GRPN wasn’t aware of the acquisition until the SEC regulatory filing. Acquisition speculation sent both stocks soaring, with BABA up nearly 9% and GRPN spiking more than 41%.
As for BABA options activity, calls were the name of the game on Tuesday. Total volume arrived at 215,704 contracts, with calls accounting for 61% of the day’s take. BABA is currently hovering just above $66, and is facing heavy call OI of 4,700 contracts and 4,000 contracts at the $66.50 and $67 strikes, respectively.
Freeport-McMoRan Inc (FCX)
Shares of mining specialist Freeport-McMoRan rallied sharply on Tuesday, with FCX soaring more than 15% following news that Freeport had sold a 13% in a copper mine for $1 billion. Sumutomo Metal Mining, which already owned 15% of the Morenci copper mine in Arizona, ponied up the $1 billion for an additional 13% ownership interest. Investors are viewing the move as a means for Freeport to pay down some of its substantial debt load.
Options traders were largely positive on the transaction. Total volume for FCX came in at 212,000 contracts, with calls snapping up 69% of the day’s take. FCX is now trading north of $6.50, placing the stock above peak call OI of 25,190 at the Feb $5 strike and an additional 23,700 call contracts at the $6 strike. From a technical perspective, the $7 level represents the next major showdown for FCX stock.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
