Wall Street is in worry mode this morning as investors debate their options ahead of several key pieces of economic data, plus a speech on monetary policy from Federal Reserve Chairwoman Janet Yellen. At last check, Dow Jones Industrial Average futures were down 0.25%, while S&P 500 futures were also off 0.25% with Nasdaq Composite futures lower by 0.16%.
Options volume remained well below average on Monday, as traders were loath to return to work following the long holiday weekend. Over on the CBOE, the single-session equity put/call volume ratio rose to a three-week high of 0.66, while the the 10-day moving average held at 0.73.
In equity options news, Apple Inc.’s (NASDAQ:AAPL) battle with the FBI is finally over, taking some pressure off AAPL options traders. Meanwhile, both Facebook Inc (NASDAQ:FB) and Netflix Inc. (NASDAQ:NFLX) saw positive action in the brokerage community.
Apple Inc. (AAPL)
The fight with the FBI is over, but did Apple really win? The company managed to stave off demands that it help the government hack an iPhone used by a shooter in last year’s San Bernadino attack. But the FBI dropped its suit yesterday after announcing it had hacked the iPhone on its own. The case was poised to potentially draw Supreme Court attention that could have set precedent for future such cases.
AAPL options traders were watching the case closely, but showed more reaction to the stock’s price action in the $105 region — an area that has become a pivot point for the shares. On Monday, volume arrived at an anemic 498,000 contracts, with calls accounting for roughly 57% of the day’s take.
As expected, the key strike to watch in AAPL’s weekly April 1 series is the $105 strike, where about 20,400 calls and half as many puts are currently open. Volatility is light for AAPL with week, with implieds pricing in about a 2% move before Friday’s close. A breach of support at $105 could have bearish implications over the short term for AAPL, prompting a spike in put implieds.
Facebook Inc (FB)
While Facebook hasn’t attracted much attention in the financial media lately, FB stock hasn’t been quiet. Shares have logged six consecutive daily gains, placing the shares on track to challenge overhead resistance near $115. Activity from the brokerage bunch could provide fuel for a continuation of this rally, as Piper Jaffray reiterated its “Overweight” rating and $170 price target on FB stock yesterday.
While options volume was below par for FB stock on Monday, call volume as a percentage of total activity remained strong. Roughly 482,000 contracts changed hands on FB stock yesterday, with calls snapping up 64% of the day’s take.
Furthermore, calls dominated the weekly April 1 series for FB, with more than 20,000 of these typically bullish contracts taking up residence at the $115 strike. Another 10,900 calls are open at the $114 strike. Put OI is mild by comparison, with peak weekly April OI totaling just 6,200 contracts at the $110 strike.
Netflix, Inc. (NFLX)
NFLX stock rallied nearly 3% on Monday, pushing the shares back above the century mark and their 10-day and 20-day moving averages. Driving NFLX higher was positive commentary from analysts at Wedbush. The brokerage firm reiterated its “Underperform” rating on NFLX, but boosted its price target to $245 from $215.
Options traders took full advantage of the target increase, with calls rising to account for 67% of the more than 309,000 contracts trading on NFLX during the session. With NFLX perched above $100 again, options traders should keep a close eye on the weekly April 1 series $100 strike, which sports call OI of 4,500 contracts and put OI of nearly 2,000 contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
