It’s all about jobs data this morning, as U.S. stock futures are edging higher in anticipation of a positive U.S. jobs report later this morning. Following ADP’s upbeat employment report earlier in the week, economists are expecting that 185,000 jobs were added in July, less than June’s 287,000, but a far cry more than the 11,000 added in May.
With little else major to go on, futures on the Dow Jones Industrial Average have risen 0.17% heading into the open, followed by a 0.22% rise in S&P 500 futures and a 0.19% rise in Nasdaq-100 futures.
Options activity was muted on Thursday, marking a sharp decline from Wednesday’s surge in activity. Overall, 12.1 million calls and 10.7 million puts changed hands yesterday. A rebound in put activity drove the CBOE single-session equity put/call volume ratio higher to 0.65, while the 10-day moving average held at 0.66 for a third-straight session. With weekly expiration and jobs data on tap, look for option volume to tick sharply higher in today’s session.
Driving yesterday’s equity options activity, Apple Inc (NASDAQ:AAPL) cleared significant options open interest at the weekly August 5 series $105 strike, setting the stage for a confrontation with the $106/$107 region today ahead of expiration. Elsewhere, a trader targeted Bank of America Corp (NYSE:BAC) with a $120 million bearish credit spread in the September series, while SeaWorld Entertainment Inc (NASDAQ:SEAS) plummeted on a severe drop in second-quarter attendance.
Apple Inc. (AAPL)
The grind higher following earnings has been excruciating for Apple traders, with the shares fighting for every penny earned north of their 200-day moving average. The $105 region appeared to be insurmountable this week after the shares failed to hold north of this key technical region, but AAPL stock has battled back and appears poised to finish out today above $106, with a run at $107 possible on a solid July jobs report.
Besting $106 (and possibly $107) would be a major coup for AAPL bulls, as the both strikes are home to more than 21,000 calls each in the weekly August 5 series (representing peak call OI for the period). For AAPL to push past the natural headwinds associated with heavy call OI at these strikes indicates a healthy degree of price support for the stock, which has bullish implications for the shares — with AAPL potentially making a run at $110 before reversing course or stalling out again.
As for Thursday’s options activity, we saw more of the same for AAPL, with calls snapping up 60% of the more than 860,000 contracts traded. The slowdown in daily call volume as a percentage of total volume could be a concern for AAPL bulls if the trend carries over into next week, however. AAPL typically sees calls make up more than 62% of daily activity.
Bank of America Corp. (BAC)
BAC stock saw a healthy amount of call activity on Thursday, with these bullish best accounting for 73% of the 467,000 contracts that crossed the tape. Despite the seemingly bullish bias, however, at least one trader made a rather large bet that BAC will dip back below $14 and hold there through September expiration.
Specifically, a block of 25,000 call contracts traded on each of the September $14 and $15 strikes. According to data from Trade-Alert.com, the $15 strike calls crossed at the ask price of 21 cents, while the $14 strike calls traded for the bid price of 69 cents, resulting in a credit of $120 million for the trader.
Since this September $14/$15 credit spread is currently “in the money” with BAC trading near $14.50 in premarket activity, the trader needs the stock to fall about 3.6% to below $14 in order to retain the premium received. Should BAC rally north of $15 by expiration, the maximum loss on the trade is 31 cents, or $31 per pair of contracts — or roughly $775,000 for the entire position (not including brokerage fees).
SeaWorld Entertainment Inc (SEAS)
Terrorism and economic hardship in Latin America are being blamed for SeaWorld’s poor second-quarter performance. The company posted a profit of 21 cents per share on revenue of $371.2 million for the quarter, compared to Wall Street’s expectations for earnings of 21 cents per share on $374.8 million in revenue.
Attendance year-over-year fell 7.6% in the quarter, with SeaWorld citing poor economic growth in Latin America (with attendance down 40% from the region) and the Pulse nightclub shooting in Orlando. As a result, SeaWorld lowered full-year guidance to earnings of $310 million to $340 million from prior expectations for $335 million to $365 million.
Options traders responded by flooding SEAS stock with puts. In fact, these bearish bets made up 97% of the near-term record 527,000 contracts traded on the stock yesterday.
SEAS is now trading south of all major call and put OI over the intermediate term, save about 2,500 puts at the $12 strike in the September series.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
