Thursday’s Vital Data: Visa Inc (V), AT&T Inc. (T) and Lululemon Athletica inc. (LULU)

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U.S. stock futures are headed lower this morning, as Wall Street weighs it options and takes some profits off the table. Traders remain somewhat cautious ahead of next week’s Federal Reserve meeting on monetary policy, but following Fed Chairwoman Janet Yellen’s somewhat dovish comments earlier this week, a rate hike is not expected to be in the cards. As a result, the U.S. dollar is trading broadly lower, while gold is rallying.

Thursday’s Vital Data: Visa Inc (V), AT&T Inc. (T) and Lululemon Athletica inc. (LULU)Against this backdrop, futures on the Dow Jones Industrial Average were last seen lower by 0.32%, S&P 500 futures have fallen 0.39% and Nasdaq-100 futures are off 0.32%.

Option volume held firm on Wednesday, though stocks saw a marked decline in favor of ETFs. In total, some 13.6 million calls and 10.9 million puts changed hands yesterday, though that total was more heavily skewed toward the call side on the CBOE. Specifically, the CBOE single-session equity put/call volume ratio slipped two notches to 0.59 yesterday, rose to 0.61, while the 10-day moving average held at 0.59.

In equity option news, Visa Inc (NYSE:V) options traders piled into bullish bets after China announced it was opening its market to foreign bank card companies. Elsewhere, AT&T Inc. (NYSE:T) options activity pointed toward speculation that the company could make another surprise offer in the bidding war for Yahoo! Inc.’s (NASDAQ:YHOO) internet business. Finally, Lululemon Athletica inc. (NASDAQ:LULU) drew fresh attention following its first-quarter earnings report.

Thursday’s Vital Options Data: Visa Inc (V), AT&T Inc. (T) and Lululemon Athletica inc. (LULU)

Visa Inc. (V)

China just opened the doors to its $8.4 trillion market to foreign bank card companies, presenting a considerable new opportunity for Visa and competitor Mastercard Inc (NYSE:MA). In 2015, 55 trillion yuan ($8.4 trillion) in bank card payments were processed, according to the People’s Bank of China. The Chinese payment market is currently dominated by state-run China UnionPay Co Ltd.

Options traders responded by flooding V stock with bullish speculation, as calls accounted for 91% of the more than 280,000 contracts traded yesterday. A closer look at the activity via Trade-Alert reveals that 100,000 of Wednesday’s volume consisted of one rather bullish trade.

Specifically, a block of 50,000 Jan 2018 $110-strike calls were purchased for $1.35, or $135 per contract, while another block of 50,000 Jan 2018 $120-strike calls were sold for 46 cents, or $46 per contract. The result is a LEAP bull call spread asked at 89 cents, or $89 per pair of contracts.

The total outlay for this 100,000 contract trade was $4.45 million — a rather hefty outlay for a bet that V stock will rally between 35% and 47% in the next 18 months.

AT&T Inc. (T)

AT&T and Verizon are in a bidding war for Yahoo!’s internet business, and speculation in the options pits is running high. AT&T entered the contest last week, but Verizon upped the ante with a $3 billion bid on Monday. Many traders and analysts expect AT&T to jump in again with a surprise offer to outdo Verizon, especially since Verizon has already assimilated AOL’s online offerings, leaving AT&T at a disadvantage.

T options traders were extremely call heavy on Wednesday, with these typically bullish bets accounting for 94% of the 270,000 contracts in total volume. Once again, Trade-Alert data reveals a rather sizeable bullish spread play may be the cause of the spike.

It appears that a trader purchased 80,000 call contracts at the June 2017 $45 strike, while simultaneously selling 80,000 call contracts at the June 2017 $50 strike. The ask for this bull call spread was 33 cents, or $33 per pair of contracts, resulting in a total outlay of $2.64 million.

Lululemon Athletica inc. (LULU)

LULU stock spiked nearly 5% on Wednesday, as traders cheered the company’s strong first-quarter same-store sales. For the quarter, LULU said it earned 30 cents per share on revenue of $495.5 million — in line with Wall Street’s expectations.

Same-store sales, meanwhile, topped expectations with a 6% rise.

Options traders responded by sending some 192,000 contracts across the tape, with puts accounting for 62% of the day’s take. Looking at LULU’s June 17 series configuration reveals peak put OI of nearly 16,000 contracts at the out-of-the-money $60 strike. This activity was likely put-sell related, as investors unwilling to bet openly bullish instead banked a profit on support for LULU ahead of earnings.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/thursdays-vital-data-visa-inc-v-att-inc-t-lululemon-athletica-inc-lulu/.

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