U.S. stock futures are pointed lower heading into the open this morning, as terror attacks in Belgium prompted a run on safe-haven investments, leaving stocks in the lurch. At last check, futures on the Dow Jones Industrial Average were down 0.3%, while S&P 500 futures were lower by 0.43% and Nasdaq Composite futures were off 0.43%.
Options volume came in above average on Monday, with volatility spiking as stocks struggled to dig their way back from losses early in the session. Over on the CBOE single-session equity put/call volume ratio rebounded to 0.71, with the 10-day moving average also closing at 0.71.
In equity options news, Apple Inc (NASDAQ:AAPL) held its much-anticipated media day event on Monday, and … well, given yesterday’s options activity, traders must have been much less than enthused. Meanwhile, embattled Valeant Pharmaceuticals Intl Inc (NYSE:VRX) announced that CEO J. Michael Pearson was stepping down, while Alibaba Group Holding Ltd (NYSE:BABA) hit a major transaction milestone, topping 3 trillion yuan.
Apple Inc (AAPL)
The days of “One more thing …” appear to be gone at Apple.\ While yesterday’s media event dotted all the I’s and crossed all the T’s, traders appeared to come away from the day with a feeling of “That’s all?” Sure, Apple confirmed the 9.7-inch iPad and the new 4-inch iPhone SE — both of which offer up solid features and should be relatively popular with Apple customers. But the only real surprising revelation of the day was the lower-than-expected pricing for the new iPhone — $399 versus expectations for a $450 price tag.
But you don’t have to take my word for it, or any other analysts’ projections. Just look at the difference between Monday’s options activity and Friday’s. Overall volume was down on Monday, coming in at just over one million contracts. Additionally, call volume as a percentage of total volume plunged from 71% heading into the event to just 58% on Monday.
AAPL stock finished essentially flat on the day, despite two brief intraday spikes to $110. The shares are now trading below heavy call OI at the $107 and $106 strikes (15,996 contracts and 13,805 contracts, respectively) in the weekly March 24 series, while put OI at the $105 strike has risen to more than 13,000 contracts.
Valeant Pharmaceuticals Intl Inc (VRX)
After shares were more than cut in half last week on bankruptcy fears, VRX stock spiked more than 7.4% on Monday. The exodus of CEO J. Michael Pearson appeared to be the big driver for VRX’s rebound, with hedge fund manager Bill Ackman will joining the company’s board of directors, adding to positive sentiment. Valeant still had to restate some financial results, however.
That said, options traders appeared to side with stock traders in terms of sentiment on Monday. Overall volume came in at more than 460,000 contracts, with VRX options activity continuing to ride well above average during the past week. What’s more, puts are beginning to fall out of favor, with calls accounting for 57% of Monday’s total volume.
In terms of OI, the weekly March 24 series $30 strike has become the level to watch this week. More than 8,600 calls have quickly accumulated at this near-term strike, while put OI now totals just north of 1,300 contracts. VRX is trading roughly 1.4% higher in premarket trading, and if the overall market cooperates, shares could make a run at $30 in short order.
Alibaba Group Holding Ltd (BABA)
Alibaba stock showed serious signs of life on Monday, after the company announced that it hit the 3 trillion yuan ($463 billion) transaction milestone. The figure represents a 23% year-over-year increase, and should help assuage some investor fears.
And BABA hopes to hit 6 trillion yuan in transactions by 2020.
Alibaba stock added 2.5% on the news, and options traders appeared ready for the rally to continue. Total option volume came in at 311,000 contracts, well above average for the stock, while calls surged to account for 77% of the day’s take. BABA is now trading just shy of the $78 strike, where roughly 1,400 call and put contracts currently reside in the weekly March series. Additionally, the $80 strike has attracted a bullish following, with nearly 2,500 call contracts in residence.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
