Stocks are headed higher in premarket trading this morning, as a rally in oil prices has helped bolster sentiment ahead of tomorrow’s European Central Bank meeting. At last check, U.S. stock futures on the Dow Jones Industrial Average were higher by 0.47%, with S&P 500 futures up 0.44%, and Nasdaq Composite futures adding 0.46%.
Options volume was pretty average for a Tuesday, though activity on stocks was considerably anemic as ETFs dominated amid the market’s retreat. On the CBOE, the single-session equity put/call volume ratio surged to a one-month high of 0.90 yesterday, pulling the 10-day moving average off its lowest point since November to end at 0.67.
On the equity options front, Apple Inc.’s (NASDAQ:AAPL) clash with the Justice Department was back in the headlines yesterday, as the DoJ is appealing a pro-Apple ruling in the New York iPhone case. Elsewhere, Wal-Mart Stores, Inc. (NYSE:WMT) saw heavy call volume ahead of today’s ex-dividend date and a company-wide pay raise slated for tomorrow. Finally, Sunedison Inc (NASDAQ:SUNE) call volume surged after news broke that the company’s buyout of Vivint Solar Inc (NYSE:VSLR) was terminated.
Apple Inc. (AAPL)
While Apple continues to battle the FBI in the San Bernardino iPhone security case, the company is also facing several other similar issues across the U.S. One such case in New York resulted in an Apple-favorable ruling, but the Department of Justice is appealing the results.
In a filing with the court, the DoJ said:
“Apple is not being asked to do anything it does not currently have the capability to do. Apple may perform the passcode-bypass in its own lab, using its own technicians, just as it always has, without revealing to the government how it did so. Therefore, granting the application will not affect the technological security of any Apple iPhone nor hand the government a ‘master key.’”
AAPL stock faltered following the appeal, but most of yesterday’s pressure likely came from broad market selling.
Still, options traders remained optimistic, with calls accounting for 61% of the day’s 589,000 contracts in total volume. In the weekly March 11 series, the $100 strike remains the level to watch this week, with roughly 13,000 put contracts and call contracts currently open at this strike.
Wal-Mart Stores, Inc. (WMT)
Wal-Mart’s biggest headline of the past day was its announcement that it was raising hourly wages across the board. “We want to provide them with a path forward and a career in the company,” Wal-Mart spokesman Phillip Keene said.
While the wage news likely provided a bit of a bump for WMT stock, options traders were more than likely focused on today’s ex-div action. Traders typically pile into call options ahead of an ex-div date as a means of implementing dividend capture strategies that allow them to pocket a dividend payout without having to own the actual stock.
On Tuesday, more than 315,000 contracts traded on WMT stock, with calls snapping up 87% of the day’s take — with most of this call activity taking place in the monthly March and April series. As for the weekly March 11 series, the at-the-money $68 strike has garnered the most attention, with nearly 5,100 call contracts currently in residence.
Sunedison Inc (SUNE)
Options traders and stock traders alike were in a positive mood on SUNE on Tuesday, after news broke that the $2.2 billion acquisition of Vivint Solar had fallen through. Sunedison was already struggling to raise cash for normal operations, and the Vivint acquisition would have provided an additional burden.
That said, SUNE is still on the hook for at least a $34 million breakup fee.
Options traders welcomed the news by piling into SUNE call contracts. More than 300,000 options traded on SUNE on Tuesday, with calls accounting for 73% of the day’s take. Levels to watch for SUNE this week include the weekly March 11 series $2 strike, with open interest of 14,382 contracts, and the $2.50 strike, where 6,175 calls are currently open.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
