U.S. stock futures are trending higher in premarket trading this morning, as strength in crude oil bolsters sentiment ahead of key economic data. Oil, which jumped 3% on Monday, has edged slightly higher this morning, holding just below $47,90 per barrel. Later this morning, inflationary data in the form of the April consumer price index will arrive, leaving the Fed to weigh its options on monetary policy.
At last check, futures on the Dow Jones Industrial Average were up 0.05%, with S&P 500 futures trading flat and Nasdaq-100 futures up 0.10%.
Options volume recovered slightly on Monday following Friday’s weakness, though exchange-traded funds — not stocks — remain the most active. On the CBOE, the single-session equity put/call volume ratio fell sharply to 0.6, its lowest reading since late April, pushing the 10-day moving average off its recent highs to 0.81.
In equity option news, Apple Inc. (NASDAQ:AAPL) call options volume failed to significantly recover on Monday, despite AAPL stock jumping nearly 4% on news of a $1.1 billion stake by Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B). Elsewhere, Home Depot Inc (NYSE:HD) call volume hit a near-term high heading into the company’s quarterly earnings report (which it killed), and Chevron Corporation (NYSE:CVX) attracted a flood of call speculation as oil prices rose 3% on Monday.
Apple Inc. (AAPL)
The Oracle of Omaha apparently believes that AAPL stock is a great bargain right now, as Warren Buffett’s Berkshire Hathaway disclosed that it acquired a $1.1 billion stake in Apple during the first quarter. The vote of confidence for Apple comes at a key time for the stock, especially after activist investor Carl Icahn announced last month that he had completely exited his stake in AAPL.
Call volume didn’t respond in kind, however. Overall options volume for AAPL slipped to 1.7 million on Monday from 1.8 million on Friday, with calls only accounting for about 59% of the day’s take. Typically, AAPL sees calls make up more than 63% of daily average volume.
That said, light call volume doesn’t mean that AAPL options traders aren’t overly bullish on the stock. In fact, pulling back to look at monthly June open interest configs reveals that peak call OI totals more than 90,000 contracts at the out-of-the-money $115 strike, with another 60,000-plus calls at the $100 strike.
Buffett’s influence is considerable, especially from a sentiment standpoint, but will it be enough to push AAPL back above the century mark?
Home Depot Inc (HD)
Home Depot stock could be in for a solid trading session today after the company beat first-quarter earnings expectations and boosted 2016 guidance.
For the quarter, HD earned $1.44 per share as revenue rose 9% to $22.76 billion. Wall Street was expecting a profit of $1.36 per share on $22.39 billion in revenue.
Looking ahead, Home Depot lifted 2016 expectations to $6.27 per share, with revenue up 6.3%, compared to prior guidance of $6.12 to $6.18 per share on revenue growth of 5.1% to 6%.
Options traders were on the ball heading into the report. Call options accounted for 62% of the more than 215,000 contracts traded on HD stock. HD closed yesterday just north of $135, leading to peak front-month call OI of more than 11,000 contracts at the $140 strike.
That may be a hard target for HD to hit heading into expiration this Friday. Heading into the open, HD stock was last seen higher by about 1.2% at $137.
Chevron Corporation (CVX)
After a Goldman Sachs report announced that oil was in a global supply shortfall, front-month crude surged 3% to to $47 per barrel, lifting the energy sector as a whole. Chevron benefited considerably from the rising tide, adding 1.5% to put some distance between CVX stock and the $100 level.
Chevron options traders joined in the rally, with calls snapping up a whopping 88% of Monday’s total volume of more than 327,000 contracts. While short-term OI lies heavily with the bears — there are several May 20 series contracts with OI in excess of 2,500 put contracts — peak monthly May call OI has ballooned to more than 15,000 contracts at the overhead $105 strike.
Smart money may have been to sell these overhead calls, however, as volatile oil prices don’t appear likely to gain much additional ground heading into the weekend, creating headwinds for CVX stock.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
