The major market indices are pointed higher this morning, as Wall Street looks for positive options ahead of a Federal Reserve monetary policy decision and some 900 corporate earnings reports slated for release this week. With many S&P 500 companies reporting, expect investors to be more than a bit overwhelmed.
Against this backdrop, U.S. stock futures on the Dow Jones Industrial Average were last seen higher by 0.28%, with S&P 500 futures also up 0.25%, while Nasdaq 100 futures were up 0.15%.
Options volume was surprisingly light on Monday given the number of corporate earnings reports slated for release this week. On the CBOE, the single-session equity put/call volume ratio rebounded sharply from Friday’s perch at 0.61 to 0.7 yesterday. The 10-day moving average, however, held pat at 0.68.
In equity options news, Apple Inc. (NASDAQ:AAPL) remained the most actively traded stock in the options pits ahead of this afternoon’s quarterly report, with out-of-the-money put buying gaining momentum ahead of the event. Elsewhere, Bank of America Corp (NYSE:BAC) saw increased option volume at the $15 strike as BAC stock pushes toward resistance in the area. Finally, Office Depot Inc (NASDAQ:ODP) reported first-quarter earnings, opining that delays on the Staples, Inc. (NASDAQ:SPLS) buyout were hurting its bottom line.
Apple Inc. (AAPL)
Rumors of an iPhone price hike in India and fears of the first ever year-over-year decline in iPhone unit sales plagued Apple stock on Monday, as investors prepared for tonight’s quarterly earnings report. Sentiment has soured on AAPL stock in recent weeks, dragging AAPL inexorably toward key support at the $100 mark.
Options traders have picked up on the trend, and have focused heavily on short-term AAPL $100-strike puts in the past two weeks. Put buying, in particular, has gained popularity at the May $100 strike, where more than 69,000 contracts currently reside.
Whether you are bullish or bearish, near-term options are historically cheap on AAPL stock, with implieds pricing in a surprisingly modest 4.7% move in the stock following earnings.
Bank of America Corp. (BAC)
After breaking out above $14 last week following a solid quarterly earnings report, BAC stock is looking a bit haggard this week. BAC has run into staunch resistance at $15, and the added weight of extended low interest rates from the Fed could halt the shares in their tracks.
The Fed begins its two-day meeting on monetary policy today, and will offer up its decision later this week.
BAC call options are seeing increased activity ahead of the Fed meeting, with these typically bullish bets accounting for 61% of the more than 387,000 contracts traded yesterday. Unsurprisingly, the weekly April 29 $15 strike call is the most popular short-term contract, sporting OI of 26,000 contracts. On the put side, the April 29 $14 put is tops with over 16,000 contracts in residence.
Office Depot, Inc. (ODP)
Office Depot reported first-quarter earnings bright and early this morning, posting a profit of 10 cents per share on sales that fell 9% to $3.54 billion. Wall Street was looking for earnings of 12 cents on sales of $3.62 billion. Office Depot said that the protracted decision on the Staples buyout was having a substantially disruptive impact on business.
Ahead of the report, ODP call options were extremely popular, snapping up 78% of the more than 250,000 contracts traded yesterday.
ODP finished Monday just above $6, though options traders were heavily focused on the weekly April 29 series $7 strike, with 82,000 calls and 46,700 puts in residence.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
