Stocks are headed for another negative open this morning, with the Dow headed for a 100-point loss right out of the gate. Driving Wall Street lower was another drop in crude prices, which tumbled more than 3% in overseas trading. Heading into the open, U.S. stock futures on the Dow Jones Industrial Average were off 0.71, with S&P 500 futures down 0.68% and Nasdaq Composite futures lower by 0.89%.
ETFs dominated options trading on Tuesday, as traders sought protection and moved away from stocks. Overall, the CBOE single-session equity put/call volume ratio rebounded to 0.71, though the 10-day moving average hit another one-week low at 0.76.
In equity options news, Apple Inc. (NASDAQ:AAPL) continues its very public battle against the FBI, while many on Wall Street are waiting to see if the Donald Trump boycott will have any effect. Elsewhere, Barrick Gold Corporation (USA) (NYSE:ABX) surged alongside gold, as the yellow metal jumped on safe-haven demand. Finally, JPMorgan Chase & Co. (NYSE:JPM) warned that it was increasing provisions against bad energy sector loans and that it was pushing back its profit goals by a year.
Apple Inc. (AAPL)
The old adage that “any publicity is good publicity” will be tested on Apple as its privacy battle with the FBI rolls on. One byproduct of the current trial is that Republican presidential candidate Donald Trump has called for a boycott of Apple products. AAPL stock fell more than 2.2% on Tuesday, though most stockholders appear unfazed by the latest Trump-inspired controversy.
Still, that doesn’t mean that AAPL stockholders aren’t taking precautions. In fact, put volume has been on the rise for AAPL for the past week. In Tuesday’s trading, puts accounted for nearly half of the 750,000 options contracts changing hands on the stock.
In the weekly Feb 26 series, out-of-the-money put open interest has swelled in the past week for AAPL. Currently peak put OI for the series 10,972 contracts a the deep out-of-the-money $85 strike, with another 8,194 at the $84 strike. Comparatively, peak call OI for the series numbers 17,670 at the $100 strike.
Barrick Gold Corporation (USA) (ABX)
ABX stock is riding the precious metals rally this week. The stock jumped roughly 5.6% on Tuesday, as gold prices rose more than 1% to $1,222.90 per troy ounce. Gold has seen an influx of demand lately due to increased market volatility and fears that another recession may be on the horizon.
Options traders jumped into the game on Tuesday, with ABX seeing record short-term volume of more than 321,000 contracts. Calls were the investment vehicle of choice, accounting for 76% of ABX’s total activity in the options pits. As for weekly February OI, ABX is staring up at nearly 2,700 contracts at the $14 strike, while 1,854 puts reside just below the shares at $13.50. A breakout above $14 this week could be a big win for ABX bulls.
JPMorgan Chase & Co. (JPM)
JPMorgan issued a rare warning on Tuesday, announcing that it will increase provisions for bad energy loans by more than 60% for the first quarter. JPMorgan blamed the increase on poor oil prices, and said that, in a worst case scenario (i.e., oil prices at $25 per barrel for 18 months) it would need an additional $1.5 billion in reserves to cover bad energy loans. Furthermore, JPM said it was pushing back the date for hitting its profitability target to 2018 from 2017.
Normally quite, options traders were out in force on JPMorgan on Tuesday. Volume came in at nearly 244,000 contracts, with activity nearly split down the middle. JPM stock is now trading below all February heavy call OI strikes, with 2,271 contracts just overhead at the $55.50 strike. As for puts, 2,809 of these typically bearish bets currently reside at the $55 strike — a key area of long-term support for JPM stock.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
