U.S. stock futures are playing it close to the vest this morning, as Wall Street waits for key U.S. jobs data. A strong May nonfarm payrolls report would support Federal Reserve Chair Janet Yellen’s recent hawkish interest-rate comments, forcing traders to consider their options on the likelihood of a rate hike sooner rather than later. Economists expect that 155,000 new jobs were added last month.
Against this backdrop, futures on the Dow Jones Industrial Average have inched 0.02% higher, S&P 500 futures have slipped 0.02% and Nasdaq-100 futures have stumbled 0.09% lower.
Option volume picked up slightly on Thursday, with today’s weekly June 3 expiration likely driving added activity in the options pits. Overall, roughly 12.1 million calls and 10.4 million puts changed hands, with calls still holding a firm lead over the past week. On the CBOE, the single-session equity put/call volume ratio rebounded sharply to 0.69 on Thursday, but the 10-day moving average slipped to 0.63 — its lowest point since July 22, 2015.
In equity option news, up 40% since mid-May, Micron Technology, Inc. (NASDAQ:MU) stock is facing stiff overhead resistance, and options traders are showing signs of worry. Meanwhile, Oracle Corporation (NYSE:ORCL) options traders faced a bit of uncertainty yesterday when a former employee filed a whistleblower lawsuit against the company. Finally, Sarepta Therapeutics Inc (NASDAQ:SRPT) was smacked lower after an FDA rules changed removed almost any hope of the company’s new muscular dystrophy drug ever achieving commercial success.
Micron Technology, Inc. (MU)
Since mid-May, MU stock has gone on a 40% tear higher. The stock was bolstered earlier in the week after Robert W. Baird & Co. lifted its target on MU from $12 to $18. Micron stock is now attempting to establish a foothold above long-term resistance at $13, but the stock’s 200-day moving averages is complicating matters. MU has not closed a session above its 200-day trendline since February 2015.
Options traders appear to be betting on a breakout. On Thursday, volume swelled to more than 359,000 contracts, with calls snapping up 79% of the day’s take. Looking at June 17 series open interest, the $13 strike is home to peak call OI of 16,700 contracts. MU is already trading north of this strike, but unless it can best its 200-day, this victory may be short lived.
Put traders believe that a rejection here could be severe, with more than 10,000 put contracts open at the June 17 series $10 strike.
Oracle Corporation (ORCL)
ORCL stock dropped nearly 4% on Thursday, after a former Oracle employee filed a wrongful-termination lawsuit, claiming she was dismissed because she refused to upwardly fudge the company’s cloud revenue. Oracle denies the allegations, but the damage to short-term sentiment is already done.
Specifically, option volume on ORCL shows a rising demand for put options. Thursday’s volume came in at 216,000 contracts, or more than 11-times ORCL’s daily average. Calls eked out a win, with 54% of the day’s take, but ORCL typically sees much higher daily call volume.
Following ORCL’s pullback, the $39 strike has become a battleground today. Roughly 2,900 calls and 2,600 puts are open at the $39 strike in the weekly June 3 series, and, with ORCL perched at $38.66 heading into the open, the shares could face options-related headwinds throughout today’s session.
Sarepta Therapeutics Inc (SRPT)
SRPT was among the biggest losers in Thursday’s trading, plunging more than 26% after the FDA announced a key rules change for “compassionate use.”
Specifically, a the FDA now requires a specific physician request for permission to use a compassionate-use drug as a last-ditch therapy. After the FDA said in April that it was not hopeful for Sarepta’s Duchenne muscular dystrophy drug eteplirsen, the new rules have removed almost any hope of commercially marketing the drug.
Despite the rules change and SRPT’s plunge, options traders still piled into SRPT call options. Thursday saw more than 173,000 contracts trade on Sarepta stock, with calls accounting for 69% of the day’s take.
For the June 17 series, traders are shifting their focus to the in-the-money $15 call, which sports OI of nearly 5,700 contracts. Roughly 5,000 puts are also open at the June 17 series $15 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
