Wall Street is taking a breather this morning, as traders digest the past three sessions and weigh their options ahead as the quarter comes to an end. While dovish Fed comments provided rally fuel on Wednesday, investors are looking a bit nervous ahead of today’s weekly jobless claims data.
Heading into the open, U.S. stock futures on the Dow Jones Industrial Average were last seen lower by 0.06%, with futures on the S&P 500 off 0.12% and Nasdaq Composite futures down 0.09%.
Options volume picked up considerably on Wednesday, and today’s volume should hit near-term highs due to tomorrow’s expiration and the end of the first quarter. Calls remain popular on the CBOE, as single-session equity put/call volume ratio came in at 0.62, dragging the 10-day moving average lower to 0.70.
In equity options news, Netflix, Inc. (NASDAQ:NFLX) saw elevated volume after FCC commissioner Michael O’Rielly called for an investigation into the company’s self-throttling of user bandwidth. Meanwhile, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) requested a reporting deadline extension from its creditors, raising default concerns, and Micron Technology, Inc. (NASDAQ:MU) released second-quarter earnings and third-quarter guidance.
Netflix, Inc. (NFLX)
What apparently began as an altruistic move by the company is quickly turning into something much bigger. Last week, Netflix admitted that it has throttled bandwidth for mobile customers on AT&T (NYSE:T) and Verizon Communications (NYSE:VZ) networks — ostensibly to save those customers from hitting their data caps.
While the news received a shrug from Netflix subscribers, FCC commissioner Michael O’Rielly is calling for a government investigation:
“Netflix has attempted to paint a picture of altruism whereby it virtuously sought to save these consumers from bumping up against or exceeding their data caps … There is no way to sugarcoat it: the news is deeply disturbing and justly generates calls for government — and maybe even Congressional — investigation.”
NFLX stock options data has been brisk for several reasons this past week — increased content spending, analyst price target increases, and the throttling news. On Wednesday, volume rose to roughly 260,000 contracts, with call volume accounting for 57% of the day’s take. With April 1 series options expiring tomorrow, and the quarter ending today, look for a significant jump in NFLX volume heading into the weekend.
As for levels to watch, the century mark is key for NFLX, with the $100 strike sporting 3,849 calls and 2,637 puts in open interest. Should the market find its legs and rally, Netflix options traders should watch the $105 call strike, as 5,563 contracts currently reside overhead at this out-of-the-money option.
Valeant Pharmaceuticals Intl Inc (VRX)
Much like Sunedison Inc (NASDAQ:SUNE), Valeant Pharmaceuticals has consistently found new and inventive ways to make its situation progressively worse.
On Wednesday, having already missed one deadline for releasing its fourth-quarter and full-year financials, Valeant requested an extension to its April 29 reporting deadline. But the request wouldn’t be fulfilled by the SEC … Valeant’s creditors would need to okay the extra time. And investors are worried this will mean default for the company.
Surprisingly, options activity for VRX stock was not flooded with puts following the request. Overall volume came in at roughly 234,000 contracts, but put and call activity was split neatly down the middle. However, there are still a preponderance of puts piled against VRX over the short-term, as the stock’s April put/call open interest ratio arrives at 1.26.
Heading into April 1 expiration, traders should watch the $27 and $25 strike puts, as both sport OI in excess of 4,400 contracts.
Micron Technology, Inc. (MU)
Option activity was brisk on Micron yesterday, as traders positioned themselves ahead of last night’s quarterly report. Initial response to the report was positive, with MU rising more than 2% after hours on a narrower-than-expected loss — Micron lost 5 cents per share compared to expectations for an 8-cent loss. However, third-quarter guidance came in well below expectations, with Micron projecting a loss of 12 cents to 5 cents per share, versus the consensus target for a profit of 5 cents per share.
Option volume was weighted toward the call side heading into last night’s report, with these bullish options accounting for 55% of the roughly 190,000 contracts traded on MU. With poor guidance weighing the stock down, the $10 strike may come into play heading into the weekend. Currently, there are 1,080 calls and 4,770 puts open at the $10 strike — a breach here could be quite bearish for MU stock.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
