U.S. stock futures are pointing toward a weak start this morning, as Wall Street eyes a Federal Reserve monetary policy meeting later in the week. Analysts expected the Fed to keep rates on hold despite recent economic data supporting a rate hike. Heading into the open, futures on the Dow Jones Industrial Average were last seen down 0.06%, with S&P 500 futures slipping 0.17% and Nasdaq Composite futures sliding 0.1%.
Options volume came in well above average on Friday, with activity driven by the expiration of weekly March 11 contracts. Overall, the CBOE single-session equity put/call volume ratio reversed course to close at 0.60, while the 10-day moving average held at 0.67.
In equity options news, traders continue to speculate heavily on Apple Inc.’s (NASDAQ:AAPL) upcoming press event, with investors looking for key updates to the iPhone and iPad product lines. Elsewhere, Bank of America Corp (NYSE:BAC) surged on Friday, drawing excessively heavy call volume, though the stock was downgraded bright and early this morning. Finally, speculation continues to swirl around Intel Corporation (NASDAQ:INTC) and the possibility of it providing modem chips for the newest iPhone model.
Apple Inc. (AAPL)
Breaking with its normal routine of offering up big product announcements in September, Apple sent out a press invite for a potentially major product reveal on March 21. Speculation is already swirling ahead of the event, with anticipated product revamps including a new 4-inch iPhone, dubbed the iPhone 5se, and a larger, more powerful 9.7-inch iPad.
Options activity was slightly below average for AAPL stock on Friday. Roughly 884,000 contracts changed hands on AAPL, though call volume was up to par, making up 64% of the day’s take. Monthly March options expire at the end of this week, and levels to keep a close eye on include the $100 strike, where roughly 80,000 calls and 64,000 puts currently reside, and the $105 strike, which sports open interest of 86,000 calls and nearly 19,000 puts.
Bank of America Corp (BAC)
BAC stock set off alarm bells for technical traders on Friday, after the stock logged its first close north of its 50-day moving average since Dec. 29. After enduring a steep decline through the middle of February, BAC has staged a rough rebound and is now looking to eclipse short-term resistance at $14. Friday’s close north of its 50-day could bring extra buyers to the table.
That is … unless this morning’s BAC downgrade at Vetr has any lasting impact. The ratings firm cut BAC from strong buy to buy this morning. Overall, BAC has attracted 27 buy ratings, compared to just four holds and no sell ratings. The consensus price target rests at $17 per share. Vetr maintains a price target of $15.06.
In response to BAC strong price action on Friday, options traders sent more than 1 million contracts across the tape. Calls were by far the most dominant contract on the day, making up 81% of total activity. Heading into March expiration, the $14 strike is the key for BAC this week, as more than 123,000 call contracts currently reside at this key level. The $13 strike is another area to keep a close eye on, as roughly 58,000 calls and puts currently call this strike home in the March series.
Intel Corporation (INTC)
Rumors are flying that Intel may have worked its way back into Apple’s iPhone. Two week’s ago, analysts at CLSA Research claimed that Intel will be responsible for 20%-30% of the modem chips in the new iPhone 7. Late last week, analysts at Cowen & Company and Credit Suisse concurred with the CLSA Research. The win would be a coup for Intel, potentially offsetting softening revenue from the PC market.
Options traders have flocked to INTC amidst the rumors, with Friday’s volume rising to more than 231,000 contracts. Puts were the option of choice on Friday, accounting for 64% of the day’s take. While it’s natural to assume that options traders may be betting on a sell-0n-the-news event should the rumors be confirmed, it also is possible that long stock traders are using INTC puts to hedge new positions via a married put strategy.
Turning toward March OI, INTC is trading firmly north of peak put and call strikes in the series. Peak call OI currently totals roughly 60,000 contracts at the $30 strike, with another 25,000 contracts at the $31 strike. The outlook is similar on the put side, with 61,000 contracts at the $30 strike, and 38,000 puts at the $31 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
