Wall Street is taking a breather this morning, as investors weigh their options following two straight bull sessions that took the major market indices further into all-time-high territory. A retreat in oil prices and a hit from Intel Corporation (NASDAQ:INTC) earnings undermined sentiment in early trading.
Still, at last check, U.S. stock futures on the Dow Jones Industrial Average were up 0.05%, while S&P 500 futures were up 0.14% and Nasdaq Composite futures were higher by 0.19%.
Options volume remained brisk on Tuesday, as the speculation surrounding corporate earnings season continued unabated. The CBOE single-session equity put/call volume ratio slipped to 0.67 yesterday, falling in line with its 10-day moving average, which logged its sixth consecutive finish at 0.67.
In equity options news, Netflix, Inc. (NASDAQ:NFLX) was a hot topic for options traders, as many looked to reposition following NFLX stock’s nearly 13% earnings-induced plunge. Elsewhere, speculation ramped up among Facebook Inc (NASDAQ:FB) options traders as the company’s first-quarter report draws nearer. Finally, Intel saw a wave of put volume ahead of last night’s quarterly earnings report — which appears to have been smart money given the stock’s 2% decline premarket.
Netflix, Inc. (NFLX)
Slowing subscriber growth and increased spending on content were the main bearish themes for NFLX on Tuesday. The company projected only 2.5 million new subscribers for the second quarter, compared to 6.74 million in the first. Additionally, Netflix said it was looking into taking on more debt later this year, a development that set off warning bells for many investors.
NFLX’s nearly 13% plunge also set off warning bells in the options pits. Volume surged to a near-term high of more than 865,000 contracts, with calls only barely taking the lead with 53% of the take.
With NFLX now trading near $94, the stock is well below all major call open interest strikes in the weekly April 22 series. Put OI, meanwhile, has accumulated nearly 3,700 contracts at the $94 strike, with roughly another 4,600 at the $91 strike and around a whopping 9,100 contracts at the $90 strike.
For those looking at a potential post-earnings NFLX trade, the weekly April 22 series $90 put sell could be a bargain. This option was last bid at 31 cents, or $31 per contract — and traders keep the premium as long as NFLX holds above $90 through this Friday’s expiration.
Facebook Inc (FB)
The FB earnings train continues to roll on in the options pits. On Tuesday, some 647,000 contracts traded on FB stock, with calls snapping up 64% of the day’s take. FB stock continues to bounce around the $110 region, with yesterday’s rally taking the shares into the $112 range.
The weekly April 29 series $115 call strike is still quite popular among bullish options traders, sporting OI of 14,359 contracts. However, the deeper out-of-the-money $120 strike has drawn OI of nearly 17,000 contracts.
This could be a sign of call spread speculation at these strikes, with a bull call spread going for an ask of $1.76, or $176 per pair of contracts, at the close of trading on Tuesday. Breakeven for such a trade rests at $116.76, while a maximum profit at expiration would be $3.24, or $324 per pair of contracts, if FB closes north of $120 next Friday.
Intel Corporation (INTC)
After the close last night, Intel reported first-quarter earnings of 54 cents per share on revenue of $13.8 billion, versus expectations of 47 cents per share and $13.8 billion in revenue. However, the company also announced a restructuring plan and the layoff of 12,000 workers.
The news has INTC stock off nearly 2% in premarket trading, and options traders appeared more than ready for the decline. Specifically, volume rose to more than 571,000 contracts yesterday, with puts snapping up 65% of the day’s take.
INTC is poised to open around $30 later this morning, placing heavy focus on the weekly April 22 series $30 strike. Currently, only 1,837 calls reside at this strike, compared to more than 21,000 puts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
