U.S. stock futures are trending higher this morning, as sentiment improved on Wall Street following a rise in oil prices overseas. Crude futures rose 0.61% to $44.72 per barrel on hopes of a production freeze out of Saudi Arabia.
Meanwhile, economic data is expected to bolster the bullish mood, after the Empire State Manufacturing Survey and the August housing market index arrive later this morning.
Against this backdrop, futures on the Dow Jones Industrial Average have added 0.20%, while S&P 500 futures are up 0.18% and Nasdaq-100 futures are up 0.19%.
Options activity was brisk on Friday during weekly expiration, with 15.2 million calls and 10.7 million puts crossing the tape. Look for volume to ramp up considerably this week as well, as monthly August options expire this Friday. On the CBOE, the single-session equity put/call volume ratio dropped to 0.55, while the 10-day moving average held at a four-week low of 0.62.
Driving Friday’s options activity, Apple Inc. (NASDAQ:AAPL) saw call volume return to normal levels after RBC Capital Markets lifted its price target and boosted its iPhone 7 outlook. Elsewhere, Alibaba Group Holding Ltd (NYSE:BABA) was flooded with bullish analyst action in the wake of its better-than-expected quarterly results. Finally, Nvidia Corporation (NASDAQ:NVDA) pushed into all-time-high territory following its own quarterly results.
Apple Inc. (AAPL)
One of the major concerns for Apple this year has been lowered iPhone 7 sales projections. One analyst has decided to buck the trend, however, as RBC Capital boosted its price target to $117 per share from $115 after increasing their iPhone unit estimate for the December quarter. According to RBC, the December quarter has an extra week that many analysts are overlooking, which should boost units sold by five to six million.
Options traders jumped on the bullish bandwagon on Friday, as more than 608,000 contracts changed hands on AAPL stock. Calls snapped up 63% of the day’s take, trending near the high end of AAPL’s average daily call volume by percentage. The shares appear to be settling into a trading range near $108, a strike with nearly 17,000 call contracts and 10,000 put contracts in open interest.
For AAPL to make any continued headway, the shares need to best $110, which could be a tall order this week. Specifically, peak August call OI of more than 52,000 contracts currently rests at $110, bolstering already stiff technical resistance in the region.
Alibaba Group Holding Ltd (BABA)
Alibaba Group silenced the lingering bearish contingent on Wall Street last week, posting blowout earnings of 74 cents per share on sales of $4.84 billion. The consensus was expecting 63 cents per share on revenue of $4.53 billion. As a result, BABA stock saw no less than 10 price-target hikes, was added to Goldman Sachs’ “Americas Conviction Buy” list and was upgraded at both Raymond James and Macquarie.
As the brokerage bunch played catch-up, BABA options traders reveled in the rally. More than 1.1 million contracts traded on BABA Friday, with calls snapping up 70% of the day’s take. Follow-through buying has BABA hovering just below $100 in premarket trading this morning, and judging by OI levels in August and September, even options traders were caught flat-footed.
BABA is currently trading north of all major call OI strikes in the August series, while about 39,000 call contracts are open at $100 in the September series. A breakout at $100 could not only see an influx of technical buyers, but also an options-related tailwind as trader rush to reposition on BABA stock.
Nvidia Corporation (NVDA)
The Nvidia train kept rolling last week, after the company posted second-quarter earnings of 40 cents per share on revenue that soared 24% to $1.43 billion. By comparison, Wall Street was expecting a profit of 37 cents per share on revenue of just $1.35 billion. Nvidia also placed third-quarter revenue guidance at $1.68 billion, topping the consensus estimate of $1.45 billion.
Naturally, NVDA calls were a hot topic on Friday, accounting for 62% of the session’s total volume of roughly 318,000 contracts. The stock is now trading north of all major call OI strikes in the August/September series, save roughly 5,300 calls at the $65 strike in September.
NVDA is trending higher premarket, and with little in the way of overhead resistance, only broad-market headwinds should slow NVDA as it approaches $65.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
