U.S. stock futures are trending higher this morning on the heels of a few outstanding quarterly corporate earnings reports. At the top of the list is Microsoft Corporation (NASDAQ:MSFT), with MSFT stock up over 5% following a better-than-expected quarter.
At last check, futures on the Dow Jones Industrial Average were up 0.30%, with S&P 500 futures adding 0.28% and Nasdaq-100 futures rising 0.31%.
Options activity continued to decline on Tuesday, as the 11.8 million calls and 10.7 million puts dipped just below the three-week average.
Calls maintained their lead however, especially on the CBOE where the single-session equity put/call volume ratio dipped to 0.67. The 10-day moving average retreated to 0.60.
In equity option news, Netflix, Inc. (NASDAQ:NFLX) was hammered its worst single-day percentage drop since October 2014 due to stagnating subscriber growth. Meanwhile, MSFT stock slipped 1.6% ahead of last night’s quarterly report, which blew past Wall Street’s expectations on strong cloud revenue. Finally, Bank of America Corp (NYSE:BAC) continues to ride follow-through buying from Monday’s solid earnings report, with the stock padding its break above former resistance at $14.
Netflix, Inc. (NFLX)
While NFLX posted its biggest single-session drop in more than a year, the shares still came nowhere close to an annual low. They didn’t even hit their January low. By ignoring the 28% year-over-year jump in revenue in favor of poor subscriber growth, investors are essentially saying that the best growth years are over for Netflix.
If that’s the case, it would seem that the losses should have been worse for NFLX — or at least there should be follow-through selling today. Instead, NFLX shares are up 0.89% premarket.
Even NFLX options traders weren’t completely ready to give up the ghost on the stock yesterday. Option volume soared to roughly 840,000 contracts, more than doubling NFLX’s average daily volume. Furthermore, calls snapped up 51% of the day’s take, with open interest jumping sharply at the August $85 strike, giving the impression that options traders are expecting a rebound over the short term for NFLX stock.
Microsoft Corporation (MSFT)
After the close last night, Microsoft blew past Wall Street’s fourth-quarter earnings expectations, posting a profit of 69 cents per share on revenue of $22.6 billion. The consensus was expecting a profit of 58 cents per share on sales of $22.14 billion.
The only oddity of the report was the lack of any mention of Microsoft’s recent LinkedIn Corp (NASDAQ:LNKD) acquisition.
Options traders were also caught off guard, as calls only accounted for 51% of the more than 717,000 contracts traded on MSFT yesterday. Furthermore, MSFT’s weekly July 22 put/call open interest ratio rose to a bearish reading of 1.02, with more puts open than calls among options most affected by Microsoft’s earnings report. If MSFT can hold onto its premarket gains, the stock is set to open north of all major call OI in the weekly July 22 series, which should mean smooth sailing this week.
Bank of America Corp (BAC)
BAC stock gained 1.06% on Tuesday, and the shares are poised to add another 1% today if premarket trading is any indication. Bank of America continues to ride high following Monday’s solid quarterly earnings report. BAC has gone on to eclipse both its 50-day moving average and long-term support/resistance at the $14 level. The next major technical hurdle for BAC is its declining 200-day trendline, which is currently descending through the $15 region.
Options traders appear hopeful for a continued run for BAC stock. On Tuesday, the shares saw more than 628,000 contracts cross the tape, with calls accounting for 67% of the day’s take.
Taking out $15 would also be huge for BAC from an options perspective, as more than 121,000 calls (peak OI for the period) reside at the August $15 strike. These calls are currently asked at 11 cents, or $11 per contract.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
