U.S. stock futures are marching higher on hopes surrounding the potential for a new U.K. prime minister and a better-than-expected earnings report from Alcoa Inc (NYSE:AA).
What’s more, the S&P 500 Index is within striking distance of a new all-time high, with futures pointing toward a gain of 10.25 points or 0.48%, at last check.
Elsewhere, futures on the Dow Jones Industrial Average are up 0.43%, while Nasdaq-100 futures have added 0.53%.
Options activity cooled off slightly on Monday, though calls remained in the driver’s seat. Overall, 16.1 million calls and 11.3 million puts crossed the tape on Monday. The call bias also carried over into the CBOE, where the single-session equity put/call volume ratio rebounded slightly to 0.58, while the 10-day moving average hit a one-month low of 0.63.
In equity option news, Apple Inc. (NASDAQ:AAPL) call buying ramped up on Monday, with a trader making a nearly $1.5 million bet that AAPL stock would trade north of $105 by October option expiration. Elsewhere, Alcoa topped Wall Street’s earnings expectations by six cents per share, and Intel Corporation (NASDAQ:INTC) scored a pair of upgrades from the brokerage community.
Apple Inc. (AAPL)
After months of being largely ignored by call options traders, AAPL stock is gaining favor once again. The stock saw total volume of more than 593,000 contracts on Monday, with calls snapping up 68% of the day’s take — a figure well above AAPL’s daily average for the past three months. AAPL options traders are likely gearing up for Apple’s July 26 trip to the earnings confessional.
Digging into Monday’s activity reveals a pair of rather large short-term call blocks. The first was a $1.5 million bet, totaling 10,000 contracts at the October $105 strike. According to Trade-Alert.com, this block went off at the ask price of $1.48, or $148 per contract. Additionally, another block of 9,475 contracts at the $105 August call also traded at the ask, this time at 40 cents, or $40 per contract.
Both traders need AAPL stock to rally more than 8% in order to realize a profit.
Alcoa Inc (AA)
While Alcoa stock rallied 3.26% on Monday, the company still caught quite a few traders on Wall Street off guard last night. After the close, Alcoa reported second-quarter earnings of 15 cents per share in the quarter on revenue of $5.3 billion. While both figures were down year-over-year, analysts were expecting earnings of 9 cents per share on sales of $5.2 billion.
Options traders were ready for the bullish results; Alcoa saw total volume hit 446,000 contracts with calls accounting for 68% of the take. Short-term speculators were focused on the July 15 series $11 strike, where more than 153,000 call contracts had accumulated. Currently, AA is trading just shy of $11 in premarket activity, and a breakout before July options expire this Friday could make a lot of AA call traders happy.
Intel Corporation (INTC)
INTC stock was a hot commodity yesterday after the stock received a pair of upgrades from the brokerage community. First, RBC Capital Markets lifted its price target to $34 from $33; the move a result of increased revenue estimates for the Client Computing Group due to strong PC sales. Second, Sanford C Bernstein & Co upgraded INTC to “market perform” and boosted its price target to $30 from $26. The brokerage firm believes there is a “relatively low” risk of Intel missing earnings estimates for the most recent quarter.
Options traders were more than happy to oblige this bullish analyst activity, as calls accounted for 77% of the more than 314,000 contracts traded on INTC yesterday. Intel is set to release earnings next week on July 20, with Wall Street expecting a profit of 53 cents per share.
Currently, options traders are focused on the in-the-money weekly July 22 $33.50 call, where over 11,000 contracts reside. Look for options traders to play catch-up with INTC over the next week as earnings draw nearer.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
