U.S. stock futures are trading flat to higher this morning, as Wall Street weighs it options ahead of a flood of data this week.
Specifically, the European Central Bank and OPEC both hold conferences on Thursday, while the monthly U.S. jobs report is due out on Friday. What’s more, Federal Reserve Chairwoman Janet Yellen’s hawkish interest-rate comments from Friday are still casting a bit of a shadow over early trading activity.
Against this backdrop, futures on the Dow Jones Industrial Average have added 0.12%, S&P 500 futures are up 0.02% and Nasdaq-100 futures have gained 0.13%.
Option volume was scant on Friday, with traders having left early for a long holiday weekend. Overall, 12.9 million calls crossed the tape on Friday, compared to 10.5 million puts. Calls flooded the options pits ahead of the weekend, with the CBOE single-session equity put/call volume ratio hitting an annual low of 0.51. The 10-day moving average was pushed lower to a one-month low of 0.67 as a result.
In equity option news, Alibaba Group Holding Ltd (NYSE:BABA) bounced back on Friday with strong call volume after Deutsche Bank all-but dismissed the SEC investigation into BABA. Elsewhere, Bank of America Corp (NYSE:BAC) saw a significant increase in call volume as BAC stock challenged key technical resistance near its 200-day moving average. Finally, Tesla Motors Inc (NASDAQ:TSLA) received a lift after announcing the grand opening date for its new gigafactory.
Alibaba Group Holding Ltd (BABA)
BABA stock bounced back more than 3% on Friday, after analysts at Deutsche Bank all but waved off the SEC investigation into Alibaba Group. According to Deutsche Bank, “These dialogues, moreover, occur with some regularity between the SEC and other listed Chinese Internet companies.” The brokerage reiterated its “buy” rating and $110 price target on BABA stock.
Options traders were emboldened by BABA’s rebound and Deutsche Bank’s commentary, as calls accounted for 65% of the 433,000 contracts traded on Friday. BABA stock broke above long-term resistance at $80 on the news, pushing the shares above heavy June 17 series put and call open interest at the $80 strike, totaling 22,000 contracts each. BABA must still contend with more than 24,000 calls at the June $82.50 strike, and 30,000 calls at the June $85 strike.
Bank of America Corp (BAC)
It’s been a rough ride for BAC so far this year, with interest-rate hikes not panning out as many in the investment banking community had anticipated. Bank of America received a bit of a boost on Friday, however, after Fed Chair Janet Yellen said that an interest-rate hike in the coming months was probably appropriate.
The news sent BAC up more than 1% on Friday, with the shares now poised to challenge $15 once again. This coming technical test could be a pivot point for BAC, as the stock’s 200-day moving average has also descended into the region.
Options traders took heart in Yellen’s commentary, sending a flood of call volume across the tape for BAC on Friday. In fact, these typically bullish bets accounted for 80% of BAC’s total volume of more than 389,000 contracts on Friday. Unsurprisingly, peak OI for the weekly June 3 series totals more than 29,000 contracts at the $15 strike, with another 113,000 calls open at the June 17 series $15 strike.
Tesla Motors Inc (TSLA)
The much anticipated grand opening date for Tesla’s gigafactory has finally been set, with Tesla opening the doors to its new battery factory on July 29. The announcement was made in an email to Tesla owners who had won a ticket to the event. Tesla has been calling the new factory “Gigafactory 1,” hinting at plans for additional facilities in the future.
The news did little to bolster TSLA stock on Friday, with the shares dipping nearly 1%, however, options traders remained call-focused on the session. Some 225,000 contracts changed hands on TSLA on Friday, with calls snapping up 59% of the day’s take.
Looking ahead to the June 17 series, peak call OI totals 8,600 contracts at the out-of-the-money $240 strike, with another 6,000 calls open at the $250 strike. TSLA hasn’t seen territory north of $250 in nearly a month, with production concerns plaguing the company in the wake of its Model 3 announcement. Positive news out of the new gigafactory could swing the situation back in TSLA’s favor.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
