U.S. stock futures are edging lower this morning, as weakening oil prices and a glut of Federal Reserve speeches this week are weighing heavily on investor sentiment.
Oil slipped 1.4% after Baker Hughes Incorporated (NYSE:BHI) reported that the number of U.S. oil rigs remained unchanged from last week, while the first of three Fed speeches today kicked off at 6:15 a.m. in Beijing.
Against this backdrop, futures on the Dow Jones Industrial Average are down 0.12%, while S&P 500 futures were off 0.13% and Nasdaq-100 futures had fallen 0.11%.
May option expiration drove volume to a short-term high on Friday, with 16.5 million calls and 14.8 million puts crossing the tape. Over on the CBOE, the single-session equity put/call volume ratio slipped to 0.79 while the 10-day moving average tripped lower to 0.80.
In equity option news, Facebook Inc (NASDAQ:FB) calls gained ground on news that FB stock was the most popular addition by hedge funds in the first quarter. Meanwhile, Netflix, Inc. (NASDAQ:NFLX) options traders were split despite bullish commentary from RBC Capital, and Micron Technology, Inc. (NASDAQ:MU) surged on stronger-than-expected second-quarter results from Applied Materials, Inc. (NASDAQ:AMAT).
Facebook Inc (FB)
While Apple Inc. (NASDAQ:AAPL) was the most sold stock by the hedge fund crowd in the first quarter, Facebook claimed the title of most sought after stock. According to data from FactSet, the 50 biggest funds snapped up more than $3 billion worth of shares of FB stock in the first quarter, with Viking Global the most active.
FB options volume came in strong on Friday following the news, with about 447,000 contracts changing hands on the day. That said, call volume was a bit below average, accounting for only about 57% of the day’s total take. Looking at the weekly May 27 series, call traders have focused their attention on the $119, $120, and $121 strikes, which each sport open interest of more than 7,000 contracts.
Netflix, Inc. (NFLX)
NFLX regained some lost ground on Friday, with the stock gaining more than 3% in the wake of bullish commentary from RBC Capital. In a phone interview with The Street on Friday, RBC said that “This (NFLX) is our No. 1 long idea,” noting that they continue to recommend NFLX and that their long thesis for the stock remains intact.
While volume rose to just above normal levels for NFLX on Friday, call activity was nothing to write home about. Some 435,000 contracts traded on NFLX on Friday, with activity split evenly between calls and puts. As for the week ahead, call traders have set their sights on the May 27 series $95 strike, with OI of 2,900 contracts, while put traders are targeting the $89 strike, where 2,690 puts currently reside.
Micron Technology, Inc. (MU)
MU stock benefited from a serious halo effect on Friday, with the shares surging in the wake of Applied Materials’ stronger-than-expected second quarter earnings report. In addition to showing strength in the sector, Applied is shifting its attention to NAND from DRAM flash memory — a move that should provide Micron with a significant tailwind this year.
As for MU options activity, volume came in well above average at nearly 400,000 contracts, with calls snapping up 62% of the take. Not all the activity was bullish, however, as a closer look reveals that one trader rolled out what appears to be a synthetic short on MU stock.
Blocks of 25,000 contracts were closed out at the May 20 series $13 put and call ahead of expiration, while similar blocks were simultaneously opened at the July 17 series $13 strike — with the calls sold to open and the puts purchased. A synthetic short seeks to use options to emulate the return of a short stock position, and is typically opened by selling an at- or out-of-the-money call and purchasing an at- or in-the-money put at the same strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
