U.S. stock futures are trading sharply higher this morning, as Wall Street cheered a surge in crude oil prices. Oil jumped to its highest level in seven months after the American Petroleum Institute reported a 5.1-million-barrel drop in crude supplies for the latest week.
Heading into the open, futures on the Dow Jones Industrial Average have gained 0.36%, with S&P 500 futures up 0.39% and Nasdaq-100 futures higher by 0.46%.
Tuesday’s stock rally didn’t spill over into the options pits, as volume retreated across the board with 14.3 million calls and 12.5 million puts changing hands.
As for the CBOE, the single-session equity put/call volume ratio fell to a second-consecutive one-month low of 0.60, dragging the 10-day moving average to another three-week low of 0.74.
In equity option news, Netflix, Inc. (NASDAQ:NFLX) saw a flurry of options activity after signing a deal to become the exclusive pay TV provider for recent Walt Disney Co (NYSE:DIS) content. Elsewhere, Microsoft Corporation (NASDAQ:MSFT) was upgraded at Cowen & Co., while Twitter Inc (NYSE:TWTR) was cut at MoffettNathanson.
Netflix, Inc. (NFLX)
Walt Disney exclusivity is a major coup for Netflix. The online streaming giant announced the deal yesterday, prompting a 3% spike in NFLX stock. The deal, which includes all content released in 2016 and beyond, includes Marvel, Lucasfilms and Pixar. Disney content will show up on Netflix in September.
Options traders were not as jazzed about the Disney exclusives as stock traders. NFLX option volume rose only slightly compared to Monday’s total, with calls eking out just 56% of the 393,000 contracts changing hands.
The DIS news vaulted NFLX shares past heavy call open interest in the weekly May 27 series, and the stock is now looking to challenge the century mark. Currently, there are more than 3,300 calls open at the May 27 $100 strike, which, when taken in combination with technical resistance in the area, could create headwinds for NFLX through the end of the week.
Microsoft Corporation (MSFT)
MSFT stock is often clinging to the outskirts of the daily top ten most active options listing, but on Tuesday, the shares roared into the top five on a flood of call activity. Driving these seemingly bullish options traders was Cowen & Co.’s MSFT upgrade to “outperform.” According to Cowen, investors are overlooking the potential of Microsoft’s transition to an Office subscription service that should drive revenue higher into fiscal 2018.
Turning to options activity, MSFT saw nearly 240,000 contracts change hands on Tuesday, with calls snapping up 68% of the day’s take. Yesterday’s rally has pushed MSFT north of peak May call OI, totaling 8,700 contracts at the $51 strike. The next major hurdle is the 4,400 calls at the $52 strike.
This region has been a technical hurdle for MSFT since the stock gapped below it on April 21.
Twitter Inc (TWTR)
Another blow for TWTR stock investors arrived on Tuesday, as MoffettNathanson downgraded Twitter to “sell” from “neutral.” According to Nathanson, Twitter is dealing with both “user fatigue” and “advertiser fatigue,” both of which make increased competition from Facebook Inc (NASDAQ:FB), Instagram and Snapchat all the more difficult.
Options traders on Tuesday appeared to take a more optimistic outlook, however. Some 202,000 contracts crossed the tape on TWTR stock, with calls accounting for 63% of the day’s take.
TWTR is currently hovering just north of 4,700 puts at the $14 strike in the May series, with another 5,600 puts open at the $13 strike. TWTR’s 52-week low rests at $13.73, making a breach of both of these heavy put OI strikes a possibility before May expiration this Friday.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
