U.S. stock futures are trending higher in premarket action this morning, with Wall Street once again bolstered by rising oil prices.
Crude futures are up more than 1% in overseas trading, hovering north of $50 per barrel on a decline in U.S. stockpiles. Following oil’s lead, futures on the Dow Jones Industrial Average are up 0.19%, S&P 500 futures have added 0.18% and Nasdaq-100 futures are 0.19% higher.
Option volume rose slightly on Tuesday, with both puts and calls seeing a bump in activity.
Overall, 13.5 million calls and 11.3 million puts crossed the tape on Tuesday, with the trend toward ETFs still holding firm. Meanwhile, on the CBOE the single-session equity put/call volume ratio rose to 0.61, while the 10-day moving average halted its recent slide at 0.59.
In equity option news, Apple Inc. (NASDAQ:AAPL) saw a slight bump in call activity despite bearish commentary from analysts at UBS. Meanwhile, General Electric Company (NYSE:GE) saw a flurry of news on Tuesday, driving record short-term put volume on the stock. Finally, Tesla Motors Inc (NASDAQ:TSLA) stock rallied sharply after Baron Capital CEO Ron Baron said the company “could be one of the largest companies in the U.S. and the whole world.”
Apple Inc. (AAPL)
AAPL stock is once again battling technical resistance at $100, but UBS said yesterday that the shares could hit $70 if iPhone shipments decline precipitously. In what it called the “Blackberry situation,” UBS warned that the company cannot keep its prior iPhone growth forever: “We cannot justify the 800 million users paying $300 a year continuing in perpetuity.”
The brokerage firm did say that this outlook was one of the more bearish scenarios it tested, and was probably too negative on Apple.
Options traders certainly paid the grim outlook little heed, with calls making up 58% of yesterday’s total volume of more than 673,000 contracts. Call volume as a percentage of daily volume remained below average for AAPL, however, which is surprising given the stock’s current push to take out resistance at $100.
Still, the century mark will be no pushover this week. Nearly 39,000 calls are currently perched at this strike in the weekly June 10 series, and could create headwinds as Friday’s expiration approaches.
General Electric Company (GE)
GE was hit with a flurry of news on Tuesday, including the completed sale of its appliances unit and the termination of 362 Texas-based jobs. GE stock was also initiated with a “market perform” rating and a $29 price target at Cowen — surprisingly, the target represents a discount to GE’s current perch north of $30.
Either options traders took Cowen’s price target to heart, or there is an arbitrage play on the appliances unit sale, because GE puts hit a daily record volume on Tuesday. 383,000 contracts traded on GE yesterday, and puts accounted for a whopping 90% of the day’s take.
Most of this put activity appears to have taken place in the January 2017 series. Currently, more than 231,000 puts are open at the out-of-the-money $25 strike, with another 125,000 puts open at the $30 strike in the January 2017 series. It would appear that traders are either expecting GE to shed about 20% this year (i.e. a bear put spread), or establish firm support north of $30 (a bull put credit spread).
Tesla Motors Inc. (TSLA)
“I think this could be one of the largest companies in the U.S. and the whole world,” Baron Capital CEO Ron Baron said of Tesla in an interview on CNBC on Tuesday. “I go to Tesla every three or four months,” Baron said, “I look at the factory and see how much is changing and talk to them on a regular basis. The competition is not anywhere.”
TSLA stock responded to the bullish commentary by surging more than 5% yesterday, finishing the session perched on its 50-day moving average. It has been more than a month since TSLA bested this intermediate-term trendline.
Options traders jumped on the speculation, piling into TSLA call options. In fact, calls accounted for 60% of Tuesday’s total volume of nearly 300,000 contracts. If TSLA can best its 50-day, it could give the shares the momentum needed to challenge $240, which currently sports call OI of more than 5,200 contracts — peak call OI for the weekly June 10 series.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
