Wall Street is headed toward its sixth-consecutive loss this morning, as U.S. stock futures are sharply lower heading into the open. Brexit fears have a firm grip on the market right now, with both the Federal Reserve and Japan’s central bank raising concerns about Britain’s looming vote on EU membership.
Against this backdrop, futures on the Dow Jones Industrial Average have dropped 0.37%, while S&P 500 futures are down more than 0.45% and Nasdaq-100 futures have fallen 0.46%.
Option volume was light on Wednesday, with only about 13.7 million calls and 12.1 million puts crossing the tape. The SPDR S&P 500 ETF Trust (NYSEARCA:SPY) was still the most active in the options pits yesterday, with 5.1 million contracts (2.6 million puts) changing hands.
Calls were more active on the CBOE, however, driving the single-session equity put/call volume ratio lower to perch at 0.68. The ratio’s sudden reversal has brought it into a cross with its 10-day moving average, which rose on Wednesday to another one-week high of 0.68.
In equity option news, Twitter Inc’s (NYSE:TWTR) rally continues to piggyback the Microsoft Corporation (NASDAQ:MSFT) buyout of LinkedIn Corp. (NASDAQ:LNKD), while Freeport-McMoRan Inc. (NYSE:FCX) surged higher on a relief rally fueled by a spike in copper prices. Finally, General Electric Company (NYSE:GE) trades ex-dividend today, prompting a flood of call volume on Wednesday due to dividend capture activity.
Twitter Inc (TWTR)
The talking heads on Wall Street continue to fuel speculation that Microsoft’s LinkedIn buyout is just the tip of the iceberg for consolidation in the tech sector. At the Bloomberg Technology Conference on Tuesday, Marc Andreessen suggested that the LinkedIn deal was the first in “a whole run” of merger and acquisition deals for tech, and Twitter has risen to the top of that list for many investors. As a result, TWTR stock extended its rally to more than 13% since Friday.
TWTR options traders continue to pile on the rally. The stock saw record short-term volume on Wednesday, with more than 483,000 contracts changing hands. What’s more, calls snapped up 74% of the day’s take, suggesting a rather bullish stance from the speculative crowd.
Surprisingly, speculation in the soon-to-expire June 17 series has been extremely heavy. Currently, the $20, $19, $18, $17, and $15 call strikes all sport open interest of more than 20,000 call contracts. By comparison, only the June $12 strike has more than 20,000 put contracts. You’ll also notice that all of the call open interest is well out of the money, with less than two trading sessions for TWTR to close the distance.
Freeport-McMoRan Inc. (FCX)
After plunging more than 60% in 2015, FCX stock has gone on a tear this year, surging more than 62% since January. Rising metals and oil prices have helped fuel FCX’s rise, and that trend continued on Wednesday, with the FCX vaulting nearly 8% higher on a 2% jump in copper prices.
Options traders chased the rally on Wednesday, with more than 192,000 contracts crossing the tape yesterday. Furthermore, calls accounted for a whopping 71% of the day’s take. The recent attention to calls has driven FCX’s June/July put/call open interest ratio steadily lower during the past several weeks, with the ratio now resting at 0.89 in the lower half of its annual range.
General Electric Company (GE)
General Electric options traders dove back into dividend capture strategies for GE stock on Wednesday. The shares trade ex-dividend today, with shareholders of record as of the close last night eligible for a payout of 23 cents per share on July 25.
Ex-div dates always bring out heavy call volume for stocks thanks to a flood of dividend capture strategies. General Electric is among the most popular for such strategies because of its solid dividend.
Volume was brisk on GE on Wednesday, with more than 480,000 contracts changing hands on the stock. Unsurprisingly, calls made up 80% of total option volume for GE on the day.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
