Stock futures have rebounded from early losses as Wall Street weighed a rebound in crude oil prices against a plunge in Asian trading. Oil is not out of the woods yet, as U.S. weekly oil inventories are due out later this morning, as well as the January ADP private-sector jobs report.
At last check, U.S. stock futures on the Nasdaq Composite were hovering above breakeven with a gain of 0.35%. Meanwhile, S&P 500 futures were up 0.49%, while Dow Jones Industrial Average had gained 0.41%.
Put volume took over in options activity on Tuesday, as Wall Street sought out protection amid the plunge. As for the CBOE, the single-session equity put/call volume ratio rose to a three-week high of 0.76, while the 10-day moving average held at 0.65 — its lowest level since early November.
On the equity option news front, Twitter Inc (NASDAQ:TWTR) was downgraded at Stifel just one day after the stock surged on buyout rumors. Elsewhere, Netflix Inc. (NASDAQ:NFLX) shares declined and put volume rose despite an upgrade from Piper Jaffray. Finally, Yahoo! Inc. (NASDAQ:YHOO) options volume hit a near-term high ahead of last night’s quarterly report.
Twitter Inc. (TWTR)
Wall Street giveth … and Wall Street taketh away. Just one day after TWTR stock spiked more than 6.6% on buyout rumors, the shares plunged more than 10% due to an analyst downgrade. Stifel cut its rating on TWTR stock to “sell” from “hold” on Tuesday, stating:
“Twitter is a product that has never fully developed into a sustainable public company due to either poor strategy, poor execution or that it was never destined to be one.”
Despite the plunge, or maybe rather due to the plunge, TWTR calls were the hot topic in the options pits yesterday. These typically bullish bets accounted for 60% of TWTR’s total volume of 328,000 contracts. Remember that while calls can be used as bets that a stock will go higher, they can also be sold in neutral-to-bullish strategies and purchased as hedges for new short-stock positions.
As for near-term open interest levels to watch for TWTR, the shares have once again pulled back to key support near $16, which is home to peak put OI of 3,647 contracts in the weekly February 5 series. Potential resistance, meanwhile, lies at the $17 strike in the form of 3,718 contracts.
Netflix, Inc. (NFLX)
It was a down day all around on Tuesday, as even an upgrade couldn’t prop up NFLX stock. Piper Jaffray lifted its rating on NFLX from “neutral” to “overweight” on Tuesday, maintaining a price target of $122 per share. According to Piper, while Netflix stock will remain volatile for the time being, the overall trend appears to be upward.
Options activity for NFLX was divided yesterday, with calls managing to snag just 55% of the more than 292,000 contracts trading on the issue. Levels to watch this week include the weekly February 5 series $90 put, where more than 5,300 contracts are currently open, and the $95 call, which sports OI of roughly 4,560 contracts.
NFLX stock is down more than 20% since mid-December, with stockholders calling into question falling U.S. growth rates despite strong showings overseas.
Yahoo! Inc. (YHOO)
Yahoo! entered the earnings confessional after the close last night to post fourth-quarter earnings of 13 cents per share on revenue of $1.27 billion. Wall Street was expecting earnings of 13 cents per share on revenue of $1.19 billion.
However, GAAP losses were $4.70 per share, with Yahoo! taking a $4.5 billion impairment charge due to an “annual goodwill impairment test.” Additionally, Yahoo! said it was exploring strategic options that could include the sale of all or some of its online properties. Yahoo! also said it is laying off 15% of its workforce and closing five offices.
Option volume hit a near-term high for YHOO yesterday, as nearly 245,000 contracts changed hands on Yahoo! stock. Calls were the most popular, snatching up 63% of the day’s take.
In premarket trading, YHOO is off nearly 2%, placing the stock near $28.50. For the weekly February 5 series, YHOO is now trading south of peak put OI of 4,959 contracts at the $29 strike, while 3,847 puts are open at the $28 strike. Call OI, meanwhile, numbers 7,223 contracts at the overhead $30 level, though YHOO will be lucky to see that strike before the close on Friday.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
