Wall Street is headed for a weak start this morning, as stocks are set to give back some of yesterday’s gains. The U.S. dollar hit an 18-month low against the Japanese yen in overnight trading, forcing currency traders to weigh their options on the greenback. Later this morning, Wall Street will digest weekly jobless claims figures.
Heading into the open, U.S. stock futures on the Dow Jones Industrial Average were last seen lower by 0.46%, with S&P 500 futures down 0.56% and Nasdaq Composite futures off 0.49%.
Options volume remained brisk on Wednesday, with ETFs continuing to dominate the landscape as traders seek out protection strategies amid the recent volatility. On the CBOE, the single-session equity put/call volume ratio dropped sharply to 0.61, while the 10-day moving average fell to a three-week low of 0.68.
In equity options news, Apple Inc. (NASDAQ:AAPL) saw heavier than normal call option volume after Needham initiated coverage on AAPL stock with a strong buy. Meanwhile, Tesla Motors Inc (NASDAQ:TSLA) was also popular among call traders despite missing first-quarter delivery projections. Finally, Facebook Inc (NASDAQ:FB) is reportedly paying media outlets and celebrities to use Facebook Live.
Apple Inc. (AAPL)
AAPL stock popped back above resistance at $110 on Wednesday, after analyst at Needham initiated coverage on AAPL stock with a strong buy rating and a $180 price target. The brokerage firm cited AAPL’s 16% global smartphone market share and rising revenue from Apple Pay for its bullish coverage.
Despite the stock’s advance, AAPL was still unable to topple stout resistance at its 200-day trendline, above which the stock has not closed a session since November.
Options traders appeared to focus more on analyst commentary than technical indicators, however, as calls racked up 64% of yesterday’s 760,560 contracts in total volume. The potential for options related resistance in the $110 area this week is great, as there are more than 11,000 call contracts at the $110, $111 and $112 strikes in the weekly April 8 series.
Tesla Motors Inc (TSLA)
TSLA stock broke out above resistance at $250 earlier this week, and the shares don’t appear to be looking back. The breakout came despite Tesla missing its first-quarter deliveries target of 16,000 vehicles; Tesla only rolled 14,820 units out the door. Tesla cited issues with supply for high-tech components, but analysts largely downplayed the issues citing growth potential with the Model 3 and production streamlining with the Model X.
Options traders chased the rally, sending 502,000 contracts across the tape for TSLA stock. What’s more, calls accounted for 58% of the day’s take, continuing a trend of rising call volume as a percentage of overall daily activity for TSLA.
As for weekly April 8 series open interest, traders have set their sights on the $270 and $275 strikes, both of which sport OI of more than 4,500 contracts. Recent activity at these strikes suggests that traders are opening call spreads above TSLA, but whether these are credit spreads or long call spreads remains to be seen.
Facebook Inc (FB)
Facebook stock managed to arrest its recent decline on Wednesday, as the shares briefly bounced off support at their 20-day moving average. Reports that Facebook is now actively paying for media outlets and celebrities to use Facebook Live bolstered sentiment on FB stock, with The New York Times, BuzzFeed and the Huffington Post among the publishers mentioned.
Option volume was heavily call weighted on Wednesday, with these typically bullish bets snapping up 66% of the more than 552,000 contracts crossing the tape on FB stock yesterday. In the April 8 series, the $114 and $115 strikes are the most popular among call traders, sporting OI of 10,150 contracts and 18,531 contracts, respectively. However, given Facebook’s history of technical resistance in the $115 region, these calls may have been sold to take advantage of weakness heading into Friday’s expiration.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
