U.S. stock futures are trading broadly lower this morning, as Wall Street considers options for taking profits ahead of a wave of economic data this week. On the short list for today are the May purchasing managers’ index, the ISM manufacturing index, May U.S. auto sales and the Federal Reserve’s Beige Book.
And let’s not forget that there are OPEC and European Central Bank meetings tomorrow, as well as U.S. May jobs data set for release on Friday.
Against this backdrop, futures on the Dow Jones Industrial Average have backpedaled 0.33%, S&P 500 futures have shed 0.31% and Nasdaq-100 futures have fallen 0.24%.
Option volume remained well below average on Tuesday, with traders apparently taking an extended break during this holiday-shortened week. Roughly 11.8 million calls and 10.3 million puts changed hands on Tuesday, falling below Friday’s volume levels. Over on the CBOE, the single-session equity put/call volume ratio rebounded to 0.58 after hitting an annual low of 0.51 on Friday. The 10-day moving average held its ground at a one-month low of 0.67.
In equity option news, Apple Inc. (NASDAQ:AAPL) options volume dipped as the shares retreat below $100 on rumors of a longer iPhone upgrade cycle. Elsewhere, Micron Technology, Inc. (NASDAQ:MU) rallied sharply following a string of positive analyst commentary, while Michael Kors Holding Ltd (NASDAQ:KORS) calls were smart money ahead of the company’s quarterly earnings report.
Apple Inc. (AAPL)
After topping $100 on Thursday last week, AAPL stock retreated back below the century on Tuesday following rumors of a longer upgrade cycles for the iPhone.
The word on the Street is that Apple is considering increasing the iPhone upgrade cycle from two years to three years, at a time when many analysts believe that Apple needs to increase iPhone updates … not slow them down.
Options traders appeared unperturbed, however, with calls accounting for 64% of AAPL’s total volume of roughly 915,000 contracts. You’ll note that call volume as a percentage of total volume returned to AAPL’s historical average, even though shares showed signs of technical weakness. It’s hard to tell whether this sentiment reading is denial of the downtrend or optimism amid a short-term pullback.
Taking a look at Apple’s June open interest configuration reveals that peak call OI for the series totals more than 80,300 contracts at the $100 strike, with another 80,200 calls open at the $115 strike. The $100 strike is also home to peak June put OI, which numbers 38,000 contracts.
Micron Technology, Inc. (MU)
MU stock has been on fire since mid-April, with shares surging more than 36% on strong earnings and analyst follow-through. In fact, Micron’s Tuesday rally was driven by yet another round of analyst upgrades.
Specifically, Robert W. Baird & Co. lifted its price target on MU shares to $18 from $12, while Raymond James upgraded the stock from “outperform” to “strong buy.”
Options traders were quick to jump on the latest move in MU, sending more than 333,000 contracts across the tape yesterday. What’s more, calls accounted for a whopping 86% of Micron’s total volume on Tuesday.
Currently, MU stock is trading north of all major call and put strikes in the weekly June 3 series, save the roughly 2,600 calls open at the $13 strike. Micron is retreating amid broad-market weakness this morning, but the shares could very well eclipse $13 before the close on Friday.
Michael Kors Holding Ltd (KORS)
After rallying more than 2% on Tuesday, KORS stock is up roughly 8% in premarket trading this morning after Michael Kors posted stronger-than-expected fourth-quarter earnings.
For the quarter, Michael Kors earned 98 cents per share on revenue of $1.2 billion, compared to expectations for 97 cents and revenue of $1.1 billion. Same-store sales rose 0.3%, topping the Street’s outlook for 0.2%.
Options traders appear to have been on the right side of this trade heading into this morning’s report. More than 176,000 contracts traded on KORS yesterday, with calls snapping up 55% of the take. If KORS’ lead carries over into the open, the shares are set to trader near $45, short of 2,400 calls at the weekly June 3 series $46 strike and 3,100 calls at the $47.50 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
