Stocks are pointed higher heading into the open this morning, as Wall Street mulls its options and looks to carry over Friday’s momentum into the unofficial start of earnings season. After the close, Alcoa Inc (NYSE:AA) will kick off the latest round of corporate earnings, in what analysts expect may be one of the worse quarters since the 2008 crash.
With that cheery thought in mind, U.S. stock futures on the Dow Jones Industrial Average have gained 0.29% heading into the open, while S&P 500 futures have added 0.31% and Nasdaq Composite futures are up 0.32%.
Options volume was brisk on Friday, with weekly April 8 expiration driving activity in the options pits. Checking in with the CBOE, the single-session equity put/call volume ratio spiked to 0.75, as puts gained considerable appeal heading into the start of corporate earnings season. Meanwhile, the 10-day moving average continued lower to tag yet another one-month low of 0.66.
In equity options news, Facebook Inc (NASDAQ:FB) investors were spooked on Friday following reports of a decline in original user postings on the social media giant. Elsewhere, Apple Inc. (NASDAQ:AAPL) held its ground below technical resistance on rumors of a keyboard-less laptop patent and a thinner Apple Watch. Finally, Tesla Motors Inc (NASDAQ:TSLA) stock hit reverse on Friday as traders took profits with the shares in overbought territory.
Facebook Inc (FB)
FB stock dropped more than 2.5% on Friday, as investors expressed their concern over a report showing a decline in original user content sharing. The gauge is widely seen as a barometer for user engagement with the site, and the decline has investors worried. So much so, that reports of a potential collaboration with MasterCard Inc (NYSE:MA) were overshadowed.
Options activity appeared unphased by the report, with calls accounting for 63% of the more than 1.3 million contracts traded on FB on Friday. Monthly April options expire at the end of the week, and Facebook is staring up at more than 37,000 contracts at the $115 and $120 strikes — with much of this activity appearing to be call-spread related.
However, with FB pulling back below its 10- and 20-day moving averages, investors should keep a close eye on activity at the $110 strike, where about 18,000 call contracts and 16,000 put contracts currently reside.
Apple Inc. (AAPL)
It’s rare for Apple options activity to come in second on daily activity rankings to anything less that an ETF, but such was Friday’s volume. Just shy of 1 million contracts changed hands on AAPL on Friday, with calls slipping to account for only 57% of the day’s take.
AAPL has has little in the way of bullish drivers lately, and rumors of a keyboard-less laptop and a thinner Apple Watch just aren’t cutting it. After rallying sharply from its February lows, Apple stock is now in a pitched battle with resistance at $110 and its declining 200-day moving average. A rejection here would not be good for AAPL bulls, as it could send the shares down for a retest of support near $105 or $100.
Indications that a return trip to $100 may occur soon are evident in Apple’s April OI backdrop. Currently, the $100 strike is home to peak call OI of more than 195,000 contracts, and peak put OI of more than 215,000 contracts. In other words, call traders aren’t expecting AAPL to go much higher, while put traders are looking for a correction to the stock’s recent run.
Tesla Motors Inc (TSLA)
Speaking of a correction to recent price action, TSLA stock retreated nearly 3% on Friday, as traders took some profit off the table. Tesla has been on fire since the debut of the Model 3, with Tesla’s new consumer model attracting a flood of pre-orders. TSLA stock was considerably overbought heading into Friday’s session, with its 14-day RSI trending toward 80 — 70 is generally considered overbought.
Hesitation was also apparent in TSLA’s options activity on Friday, with calls pulling back to account for only about 52% of the session’s more than 469,000 contracts in total volume. The $250 strike is the level to watch over the short-term this week, with 3,600 calls and 3,100 puts currently open in the April series.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
