U.S. stock futures are following oil higher this morning, as wildfires in Canada, disruptions in Libya and an outage in Nigeria have cut production by roughly 1.6 million barrels per day. Crude for June delivery has gained roughly 1% to trade north of $44 per barrel in London, and Wall Street is weighing bullish options for oil going forward.
Against this backdrop, futures on the Dow Jones Industrial Average have added 0.37%, with S&P 500 futures up 0.33% and Nasdaq-100 futures rising 0.27%.
Options volume jumped on Monday, with ETFs accounting for the lion’s share of activity on the day. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) was most active, with more than 2 million contracts traded on Monday. Overall, the CBOE single-session equity put/call volume ratio pulled back from Friday’s four-month high to settled at 0.86, though the 10-day moving average tagged a second-consecutive three-month high of 0.76.
In equity option news, Baird has some rather bearish words for Apple Inc. (NASDAQ:AAPL), while Facebook Inc (NASDAQ:FB) call options spiked as the stock continued to battle resistance at $120. Finally, Baxter International Inc (NYSE:BAX) scored a bullish initiation from analysts at Evercore ISI.
Apple Inc. (AAPL)
Apple earnings expectations for 2017 are “too high” and the Street’s outlook for the iPhone 7 is “too lofty,” analysts at Baird told CNBC yesterday. According to Baird’s Will Power, AAPL stock still has additional downside risk, despite trading near multi-year lows. Power still maintains a $115 price target on AAPL, saying the stock will recover with the eventual release of the iPhone 8.
Sentiment has trended lower on AAPL stock for a while now, and it’s beginning to take a toll on daily options activity. Specifically, Apple typically sees call volume account for north of 65% of daily activity, but that figure has trended closer to 55% during the past several months. On Monday, calls accounted for about 59% of the 663,000 contracts traded on AAPL, and while this was above the recent average, it’s still well below historical daily data for the stock.
Still, the impact to sentiment appears to be affecting longer-term options contracts, as short-term traders continue to load up on calls. In the weekly May 13 series, peak call open interest totals nearly 13,000 contracts at the overhead $95 strike, with another 12,500 at the deep out-of-the-money $100 strike. By comparison, peak put OI for the series numbers just 9,440 contracts at the $90 strike.
Facebook Inc (FB)
Facebook stock has done little since gapping higher on April 28 following a stellar quarterly earnings report. The shares have been unable to topple staunch resistance at $120, and crunch time is approaching quickly as FB’s daily trendlines catch up. However, technical indicators point higher for FB stock, and options traders appear to be betting big on a breakout.
On Monday, FB stock call traders were out in force, with these typically bullish bets snapping up a hefty 70% of the more than 483,000 contracts crossing the tape. With FB battling $120, it should come as no surprise that peak call OI of 10,000 contracts in the weekly May 13 series resides at this strike. Another 9,900 calls are also open at the $121 strike, with 8,200 more at $122.
The call open interest situation doesn’t lighten any in the month May 20 series, as more than 48,000 calls are open at the $120 strike in this front-month contract. As such, a breakout above this wealth of overhead call OI here could be huge for FB stock.
Baxter International Inc (BAX)
Baxter International has been a juggernaut since the shares bottomed out in mid-January. BAX has steadily gained more than 27% during this time frame, and analysts are beginning to pay close attention. For instance, Evercore ISI initiated coverage on BAX stock with a “buy” rating and a $51 price target on Monday.
What’s more, there is plenty of room for more analysts to follow Evercore higher, as BAX has attracted only two “buy” ratings, according to Thomson/First Call, compared to 11 “holds” and no “sell ratings.
Options traders, meanwhile, haven’t quite bought into the trend. Volume has been well above average for a while now on BAX, with the stock making repeated appearances in the daily top-ten most active list for the past two weeks. Still, Monday’s activity, which saw calls account for only 51% of the 550,000 total contracts traded, has been representative of the norm.
Looking at short-term activity, peak call OI for the weekly May 13 series totals 2,950 contracts at the just-overhead $45.50 strike, while peak put OI numbers 1,626 contracts at the $44.50 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
