U.S. stock futures are headed for their fourth straight negative open this morning, as Wall Street weighs options on both the Federal Reserve and the U.K.’s European Union membership vote.
The consensus is that the Fed will not raise rates this week, but Fed Chairwoman Janet Yellen has remained rather hawkish on rates despite poor U.S. jobs data. Additionally, shifting sentiment on the Brexit vote has Wall Street traders seeking safety in droves.
At last check, futures on the Dow Jones Industrial Average were off 0.16%, S&P 500 futures have shed 0.24% and Nasdaq-100 futures have fallen 0.27%.
Option volume came in above average on Monday, as traders returned from the weekend with an appetite for put contracts. In fact, 13.9 million puts traded on Monday, compared to 13.7 million calls. Activity on the CBOE was more call friendly, however, with the single-session equity put/call volume ratio rising to 0.75, while the 10-day moving average hit a one-week high of 0.65.
In equity option news, Apple Inc. (NASDAQ:AAPL) remained the center of attention for options traders amid the company’s Worldwide Developers Conference (WWDC). Meanwhile, Microsoft Corporation (NASDAQ:MSFT) announced a surprise buyout of LinkedIn Corp (NASDAQ:LNKD) for $26.2 billion, pushing both stocks onto Monday’s most active options listing.
Apple Inc. (AAPL)
Apple’s WWDC kicked off on Monday, and the offerings so far are pretty much what investors were expecting. Day one brought about tweaks to Apple Music to bring it more in line with Spotify and to improve the services integration with iTunes. Also on the table were OS upgrades including tvOS 2, watchOS 3, iOS 10 and macOS.
While the conference so far has been a positive for Apple, investors appear to be wanting more.
Nowhere is this more apparent than in the stock’s options backdrop. Call volume came in below average on Monday, with these typically bullish bets accounting for only about 58% of the over 846,000 contracts changing hands on AAPL. Overall, short-term calls remain in control, with the June put/call open interest ratio arriving at 0.61, though this ratio is up sharply in the past two weeks as enthusiasm surrounding WWDC fades.
Microsoft Corporation (MSFT)
Microsoft shocked investors on Monday by announcing that it was buying professional social media firm LinkedIn for $26.2 billion. The deal is all cash and values LNKD at about $196 per share. The deal is expected to close this year, and LinkedIn will retain its brand and independence and Jeff Weiner will remain as CEO.
Option volume spiked sharply on MSFT stock in response to the news, with calls maintaining a slight edge on the session. More than 358,000 contracts changed hands on MSFT, with calls snapping up 53% of the day’s take. MSFT stock fell more than 2.5% on Monday, placing the stock just above 22,000 calls and 20,000 puts at the June 17 series $50 strike. Don’t look for MSFT to stray too far from this mark though expiration this Friday.
LinkedIn Corp (LNKD)
LNKD stock surged more than 46% following news of MSFT’s buyout. The shares closed Monday at $192.91, just shy of the $196 buyout target. LNKD has struggled considerably in the past several months, with the shares falling more than 50% from their 2015 highs — this includes the current 33% rally off LNKD’s February lows.
Speculation was rife on LNKD on Monday. A rare visitor to the top ten most active listing, LNKD saw nearly 180,000 contracts trade yesterday, with calls accounting for 59% of the day’s take.
The shift marks a serious reversal in sentiment for LNKD, with its June 17 series put/call open interest ratio currently resting at 1.49. That said, with LNKD essentially locked in unless the deal falls through, options traders are left with few strategies other than arbitrage going forward.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
