U.S. stock futures are pointed toward a negative open later this morning, as Wall Street gets nervous ahead of the outcome of Fed’s monetary policy meeting.
Many expect the Fed to weigh its options and hold pat on rates for now, but Fed Chair Janet Yellen’s wording following the meeting will be heavily scrutinized for signs of future rate policy.
Heading into the open, futures on the Dow Jones Industrial Average were last seen down 0.44%, with S&P 500 futures falling 0.56% and Nasdaq Composite futures off 0.34%.
Options volume was anemic on Monday, as traders adopted a wait-and-see attitude ahead of the Fed. Overall, the CBOE single-session equity put/call volume ratio rose slightly to 0.69, while the 10-day moving average held for a third session straight at 0.67.
In equity options news, Facebook Inc (NASDAQ:FB) saw increased options activity after analysts at Baird issued a bullish research note on 2016 revenue. Meanwhile, Baird also upgraded Tesla Motors Inc (NASDAQ:TSLA) on accelerating production, while Oracle Corporation (NASDAQ:ORCL) saw heavy speculation ahead of this afternoon’s quarterly earnings report.
Facebook Inc (FB)
Look for Facebook to once again top revenue estimates in 2016. According to analysts at Baird, Facebook is on track to once again top expectations due to increased online ad spending. In a research note on Monday, Baird analysts cited strong ad spending trends in the first quarter, with Facebook sure to benefit from the added growth in social media spending.
Following rather lackluster activity on Friday, option volume rebounded on Monday for FB. Overall, some 308,000 contracts traded on FB, though call volume arrived at an anemic 54% of the day’s take. Options traders have growth wary of FB as the stock approaches key resistance at $110. In fact, this strike is home to more than 48,000 calls and 19,000 puts in the March series. With uncertainty ahead of the Fed, look for FB to stall near $110 unless another major driver arises.
Tesla Motors Inc (TSLA)
TSLA stock was upgraded at Baird on Monday. The brokerage firm lifted TSLA to “outperform” with a price target of $300 per share. In a research note to clients, Baird said that “Although we were concerned about the rate of Model X deliveries, recent data points show production is accelerating, which should drive deliveries and margin expansion throughout 2016…”
Options traders leapt at the news, sending more than 227,000 contracts across the tape on Monday. Furthermore, calls were unusually active, accounting for more than 63% of the day’s take. In the past month, TSLA has retaken the key $200 strike, but $220 looms overhead as short-term resistance. What’s more, the stock is facing some 5,400 call contracts at the $220 strike in the March series, which could create additional headwinds this week.
Oracle Corporation (ORCL)
Oracle will step up to release its fourth-quarter earnings report after the close of trading this afternoon. Currently, analysts are expecting a profit of 62 cents per share on revenue of $9.13 billion — both figures are down year-over-year. EarningsWhisper.com places the whisper number for today’s report at 63 cents per share.
Naturally, ORCL’s options pits are rife with speculation. On Monday, ORCL saw volume spike to more than 212,000 contracts, well above the stock’s daily average. Puts are the option of choice heading into ORCL’s report, with these typically bearish bets accounting for roughly 68% of yesterday’s take.
Drilling down on March options, call traders have set their sights on the $38 and $39 strikes, with OI of roughly 14,000 contracts and 15,800 contracts, respectively Meanwhile, put traders have targeted the deep-out-of-the-money $34 strike, which sports OI of nearly 19,000 contracts, and the $37.50 strike, with nearly 25,000 contracts in residence.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
