U.S. stock futures are taking a breather this morning following yesterday’s surge higher. Weak overseas oil prices weighed on sentiment early, but crude has since bounced back to trade up nearly half a percent at $44.13 per barrel. Walt Disney Co. (NYSE:DIS), however, is pacing losses on the Dow Jones Industrial Average following a disappointing quarterly report, creating trouble for bullish DIS options traders.
Heading into the open, futures on the Dow Jones have shed 0.27%, with S&P 500 futures off 0.20% and Nasdaq-100 futures slipping 0.19%.
Options volume remained elevated on Tuesday, with the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) still taking the lead, though Pfizer Inc. (NYSE:PFE) was close on its heels. Overall, the CBOE single-session equity put/call volume ratio remained volatile, jumping back into four-month high territory to come in at 0.91. The 10-day moving average tagged its third-consecutive three-month high of 0.80, signaling that options traders are growing nervous about a potential reversal in the market.
In equity option news, Disney attracted heavy call volume ahead of last night’s quarterly report, but the optimism appears to have been misplaced, with DIS stock down nearly 5% in early action. Meanwhile, Pfizer Inc. (NYSE:PFE) was literally flooded with call activity ahead of PFE stock’s ex-dividend date, and Amazon.com, Inc. (NASDAQ:AMZN) following bullish analyst speculation from Bernstein.
Walt Disney Co (DIS)
Despite strong showings from Star Wars: The Force Awakens and Zootopia, Walt Disney still managed to come up short of Wall Street’s first-quarter expectations. For the quarter, Disney earned $1.30 per share on revenue of $12.97 billion, versus the consensus estimate for $1.40 per share and revenue of $13.19 billion.
DIS stock was last seen trading down nearly 5% at $101.60, placing many call traders and the psychologically significant $100 mark at risk. Ahead of the report, call options accounted for 63% of the nearly 340,000 contracts traded on DIS on Tuesday.
Short-term speculators were clearly looking for a rally, with more than 7,500 call contracts open at the $107 and $110 strikes in the weekly May 13 series. Put attention was focused at the $103 strike, with 6,400 contracts in residence. With the wealth of short-term put OI set to open in the money, traders’ attention may turn to the $100 strike, where about 4,300 puts currently reside.
Pfizer Inc. (PFE)
Pfizer has been a regular visitor to the top ten most active options listing recently, but Tuesday’s activity was quite a shocker to anyone not paying attention. Roughly 1.2 million contracts traded on PFE stock yesterday, setting a near-term record for daily volume on the stock. What’s more, calls made up a whopping 96% of Tuesday’s volume … though this activity was far from bullish in nature.
Specifically, PFE stock trades ex-dividend today, meaning anyone controlling the shares as of the close on Tuesday will be eligible to receive PFE’s cash dividend payment of 3 cents per share on June 1, 2016.
For the specifics on how to use call options to capture dividends ahead of the ex-dividend date, check out this article by The Options Guide.
Amazon.com, Inc. (AMZN)
Is AMZN stock going to $1,000 per share? Will there be a stock-split in AMZN’s future? A wave of speculation lit a fire under AMZN stock yesterday, sending the shares to a fresh all-time high. Bullish AMZN commentary from Bernstein helped fan the flames, with the firm upping its price target to $1,000 from $770.
Options activity ramped higher as a result, with more than 235,000 contracts changing hands on AMZN. Call traders remained somewhat reluctant to chase new highs, however, with calls only accounting for about 57% of the day’s take.
Looking at short-term weekly May 13 OI, AMZN is poised to close out the week north of peak call OI at the $700 strike, totaling 2,700 contracts. Above $700, there are 1,800 calls at $710 and nearly 1,500 at $720.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
