U.S. stock futures are edging higher this morning, as many on Wall Street expect the Federal Reserve to enter damage-control mode after the economy added just 38,000 jobs last month.
Federal Reserve Board Chair Janet Yellen had said that an interest-rate hike was a possibility at the Fed’s next meeting, but most economists expect Yellen to back away from that stance at a speech later today at the World Affairs Council of Philadelphia.
At last check, futures on the Dow Jones Industrial Average have added 0.12%, with S&P 500 futures up 0.05% and Nasdaq-100 futures 0.08% higher.
Option volume returned in spades on Friday, with weekly option expiration and weak economic data driving a fresh wave of speculation. Calls were still on top, with roughly 15.3 million contracts traded, compared to 13.7 million puts.
Exchange-traded funds were the big winner on the day, with the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) leading the way with 5.5 million contracts — 3.1 million of those were puts. On the CBOE, the single-session equity put/call volume ratio fell to 0.59, while the 10-day moving average dropped to 0.61, its lowest reading in more than a year.
In equity option news, Bank of America Corp (NYSE:BAC) call volume jumped on bargain-hunting speculation after BofA fell on diminished prospects for an interest-rate hike from the Fed. Citigroup Inc (NYSE:C) lost ground for similar reasons, but the banking giant also warned that second-quarter income would be down 25% year-over-year.
Finally, Apple Inc. (NASDAQ:AAPL) was fueled by additional speculation that it would finally release a competitor to the Echo from Amazon.com, Inc. (NASDAQ:AMZN).
Bank of America Corp (BAC)
Investment banking’s plight has been clear in 2016. The sector began the year with high hopes of rising revenue as the Fed promised a string of interest-rate hikes. However, weak economic data has limited Yellen’s Fed to just one hike. Friday’s weak U.S. jobs data set the stage for yet another delay, driving BAC stock roughly 3.5% lower in response.
Options traders used the situation to load up on BAC calls in hopes of leveraging an oversold situation in the stock. On Friday, more than one million contracts traded on BAC, with calls snapping up 69% of the day’s take. With a wealth of call positions established, it’s now a waiting game for Bank of America bulls.
Looking at monthly June 17 series options, BAC speculators have set their sights on the $15 strike, where more than 117,000 call contracts are currently open. Another 72,000 calls are open at the in-the-money $14 strike in the June series. As for put traders, the $14 strike is home to peak June OI of more than 64,000 contracts.
Apple Inc. (AAPL)
Late last year, Amazon.com pioneered the smart speaker — a device that allows search, ordering and a wealth of other voice-driven activities. Alphabet Inc (GOOG, GOOGL) recently joined the fray with it’s own smart speaker, Google Home. For investors, the question for Apple is no longer if the company will offer its own competitor, but when. The late entry also underscores Apple’s lack of innovation, as it continues to trail both Amazon and Google in product offerings.
Options speculators continue to load up on AAPL calls despite the stock’s nearly 25% decline in the past year and Apple’s flagging leadership role. On Friday, total volume rose to 910,000 contracts, with calls accounting for 56% of the day’s take — well below AAPL’s typical daily call activity.
Checking in with June 17 series, Apple options traders have focused their attention on the $100 strike, which sports OI of more than 92,000 call contracts. Another 80,000 call contracts are open at the $115 strike. Puts, meanwhile, are also centered on the $100 strike, totaling more than 42,000 contracts.
Citigroup Inc (C)
While Citigroup continues to suffer alongside Bank of America due to delayed interest-rate hikes from the Fed, the company also offered up guidance that added to C stock’s malaise on Friday. Specifically, Citigroup said it expects income to fall 25% year-over-year in the second quarter due to slow performance in its capital markets business and growing compliance costs.
Like BAC options traders, C traders appeared to go on a bargain-hunting spree in the options pits. Volume soared to 291,000 contracts for C, with calls accounting for 57% of the day’s take. These call traders have set their focus on the June 17 series $47.50 and $50 strikes, which both sport OI of more than 41,000 contracts each.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
