Wall Street is headed sharply higher heading into Wednesday’s open, as sentiment was bolstered by strong Chinese economic data. Specifically, Chinese exports gained for the first time in nine months, rise 11.5% year-over-year in March. Stateside, March retail sales and producer prices reports are slated to hit the Street later this morning.
At last check, U.S. stock futures on the Dow Jones Industrial Average were up 0.45%, while S&P 500 futures had added 0.49% and Nasdaq Composite futures were up 0.69%.
Options volume was average for a Tuesday, though puts gained in popularity despite the market’s positive session. On the CBOE, single-session equity put/call volume ratio rebounded to 0.72, forcing the formerly declining 10-day moving average to rise to 0.67.
In equity options news, Chesapeake Energy Corporation (NYSE:CHK) saw a surge in put option volume yesterday despite a swell in bullish analyst commentary and a 34% spike in CHK stock. Meanwhile, Apple Inc. (NASDAQ:AAPL) was reiterated on Goldman Sachs’ conviction buy list ahead of earnings, and Bank of America Corp (NYSE:BAC) saw heavy speculation ahead of tonight’s quarterly results.
Apple Inc. (AAPL)
Goldman Sachs is bullish on Apple.
The brokerage firm made no bones about its position yesterday, when it reiterated AAPL stock on its conviction-buy list with a $155 price target. Goldman also believes this is a “beat and raise” quarter for Apple, with penned-up demand for the iPhone 7 likely to boost results this fall.
Options traders are nearly always bullish on Apple stock, and Tuesday was no different. Volume came in at more than 743,000 contracts, with calls making up a less-than-typical 55% of the day’s take. Over the short-term, AAPL options traders are keeping a close eye on the $110 strike, which has proved to be thorn in the shares’ side.
Currently, more than 101,000 calls and 44,000 puts are open at the April 15 series $110 strike, with implieds suggesting a 1.5% move by the time these options expire this Friday.
Bank of America Corp (BAC)
Bank of America is slated to release its first-quarter earnings results after the close of trading this afternoon, and options traders are speculating heavily ahead of the report. Expectations have fallen over the past several weeks, with Wall Street now targeting earnings of 21 cents per share on revenue of $20.3 billion — down 22% and 5.2% year-over-year, respectively.
Implieds are pricing in a post-earnings move of nearly 4% for BAC stock, with the April 15 series $14 call the most popular strike (106,500 contracts) among short-term traders. On the put side, it appears that BAC put spreads have attracted quite a few bets, with the $12/$13 spread the most popular as more than 60,000 contracts currently are open at each strike in the April series.
Chesapeake Energy Corporation (CHK)
CHK stock options traders appeared to be buying protection by the handful on Tuesday, despite a 34.5% spike in the shares and a surge in bullish analyst commentary. Nearly 1 million CHK option contracts changed hands on the session, with puts accounting for 58% of the day’s take.
Despite the added put volume, the most popular short-term CHK option contract is the April 15 series $6 strike call, where nearly 140,000 contracts are currently open. On the put side, the $6 strike, with roughly 70,000 contracts, trails the deep out-of-the-money $3 strike, with nearly 81,000 contracts, in terms of popularity.
While the $6-strike puts were likely purchased in anticipation of a decline, the $3-strike puts were most likely sold as part of a more neutral options strategy. At last check on the CBOE, the April $6 puts were asked at 35 cents, while the April $3 puts were bid at 2 cents. The in-the-money April $6 calls, meanwhile, were last asked at 37 cents.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
