Wall Street is headed toward a positive open this morning, as Friday’s late-session strength is spilling over into Monday morning trading. Cheered on by the prospect of slower-than-forecast Fed rate hikes, investors are seeing out bullish options after shaking off another reversal in oil prices, which have headed lower in premarket trading.
At last check, U.S. stock futures on the Dow Jones Industrial Average were up by 0.16%, with S&P 500 futures rising 0.24% and Nasdaq Composite futures higher by 0.22%.
Options volume was up sharply on Friday, though most of the activity was focused on ETFs ahead of weekly April 1 series expiration. Over on the CBOE, the single-session equity put/call volume ratio fell to 0.63 amid a dearth of call activity, while the 10-day moving average remained unmoved at 0.7.
In equity options news, Tesla Motors Inc (NASDAQ:TSLA) continued to rack up the preorders on its newly unveiled Model 3 on Friday, with CEO Elon Musk reporting the figure had topped more than a quarter-million vehicles. Elsewhere, Cisco Systems, Inc. (NASDAQ:CSCO) was flooded with call volume ahead of today’s ex-dividend date, while Twitter Inc (NYSE:TWTR) was hit with a rare upgrade early this morning after shedding more than 3% on Friday.
Tesla Motors Inc (TSLA)
More than 276,000 Tesla Model 3s have been reserved since the company began taking deposits on March 31. After providing continuous updates throughout Thursday and Friday, CEO Elon Musk announced the latest total Saturday afternoon. If TSLA can produce enough cars — production and deliveries have been a sticking point for Tesla’s growth — the Model 3 is on pace to become the best selling compact luxury car in its first year of production.
While options activity has been brisk on Tesla stock, traders have been reluctant to buy into the rally. On Friday, TSLA saw more than 574,000 contracts change hands, setting a near-term high for option volume. Call volume, however, only accounted for 58% of the day’s take, hinting at a degree of caution despite the stock’s recent surge in price action.
Checking in with weekly Apr 8 series open interest, the $245/$250 call spread appears to be a hot item for TSLA short-term traders. More than 3,500 contracts are open at the $245 strike, with 3,100 calls open at $250. At the close on Friday, the $245/$250 spread was asked at $1.32, or $132 per pair of contracts, with a maximum profit at expiration of $3.68, or $368 per pair of contracts.
Cisco Systems, Inc. (CSCO)
Cisco stock options were unusually hot on Friday, even with CSCO trading ex-dividend today. Some 537,000 contracts traded on CSCO, with calls surging to account for 93% of the day’s take.
Dividend capture spreads are the most likely culprit for Friday’s surge on CSCO, with owners of record as of Friday’s close eligible for Cisco’s dividend payout.
The increased demand for CSCO’s dividend likely stems from Cisco’s recent payout hike. Since the company began paying a dividend in March 2011, Cisco has hiked its payout six times, with the most recent bump of 24% bringing the dividend up to 26 cents per share.
Twitter Inc (TWTR)
Twitter stock received a rare upgrade bright and early this morning, with Pivotal Research bumping its rating on the shares from hold to buy. According to data from Thomson/First Call, TWTR was last upgraded to outperform from market perform at Raymond James on Feb. 23 — a move that followed three consecutive downgrades in early February.
The upgrade comes even though TWTR retreated back below its 10-, 20-, and 50-day moving averages on Friday. The stock has fought a losing battle against this trio for the better part of the past five months.
Looking at options activity, Friday’s volume was skewed heavily toward the call side. Overall, roughly 190,000 contracts changed hands, with calls accounting for 82% of the day’s take. TWTR watchers should keep an eye on the weekly Apr 8 series $15.50 call. There are currently more than 8,600 contracts at this in-the-money strike, though any additional weakness could threaten returns on this option.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
