U.S. stock futures are mired in the red this morning, as Wall Street soured on a drop in oil prices. Crude futures are off 2.68% at $47.19 in overseas trading this morning on dwindling hope of a production freeze out of the Middle East and a rise in the U.S. oil-rig count.
Meanwhile, buyers are on hold ahead of a speech by Federal Reserve chief Janet Yellen at the central bank’s summer retreat.
Against this backdrop, futures on the Dow Jones Industrial Average have shed 0.31%, while S&P 500 futures are down 0.26% and Nasdaq-100 futures have shed o.25%.
Options activity was brisk on Friday, as August expiration drove a wealth of repositioning and position closures. Overall, roughly 15.8 million calls and 12.3 million puts changed hands on Friday, giving calls a slight edge on the session. That edge was also apparent on the CBOE, where the single-session equity put/call volume ratio arrived at 0.60, though the 10-day moving average ticked higher to 0.59 from Thursday’s one-month low of 0.58.
Driving Friday’s options activity, Facebook Inc (NASDAQ:FB) saw call volume swell to above average levels following news that the company was partnering with Unity to develop desktop games Meanwhile, Micron Technology, Inc. (NASDAQ:MU) calls were flying off the shelves after research firm MScience cited NAND pricing benefits and increased DRAM sales. Finally, United States Steel Corporation (NYSE:X) puts popped after KeyBanc downgraded the company.
Facebook Inc (FB)
Social media giant Facebook said late on Thursday that it was partnering with Unity to develop desktop games playable on Facebook’s platform. Facebook already has a player base of about 600 million gamers, prompting Piper Jaffray to offer up bullish commentary on Facebook’s move:
“I think in general if you look at Facebook’s goal here, it’s to be more open and connected. Ultimately I think that’s what gaming is all about. I think the old view of gaming, sitting in the basement and playing alone, is over. Now, it’s about multiplayer gaming on consoles, desktops, or even mobile.”
The news helped drive FB stock options volume to above average levels on Friday, as about 348,000 contracts changed hands on the equity. What’s more, calls accounted for 64% of the day’s take. Looking at weekly August 26 series open interest, FB is currently staring up at 5,900 calls at the $124 strike and 6,200 calls at the $125 strike, which could create some headwinds this week.
Complicating matters, FB has dipped below its 10-day and 20-day trendlines, which are poised for a bearish cross — a development that could give technical traders pause.
Micron Technology, Inc. (MU)
MU stock rallied more than 3% to close out the week on Friday, after research firm MScience said the semiconductor firm should benefit from NAND flash pricing and increased DRAM sales volume. MScience set its sights on $3.35 billion in revenue for the current quarter, well above the current consensus target of $3.06 billion in revenue for Micron.
MU call option speculators took to the options pits on droves on Friday. Total volume came in at 281,000 contracts, with calls snapping up a hefty 81% of the day’s take. MU flirted with $16.50 on Friday, and options traders have pushed OI at the weekly August 26 series to more than 4,500 contracts at this strike, making it home to peak call OI for the series.
The $17 strike about fourth on the list in terms of total OI, with about 2,800 contracts in residence, though, should MU stock top $16.50 this week, call OI at $17 should offer little in the way of blowback for the stock.
United States Steel Corporation (X)
U.S. Steel stock has been on fire in 2016, soaring more than 150% since the start of the year. However, not everyone is onboard the bullish X train, as KeyBanc downgraded X stock to “underweight” from “sector weight” on Friday. According to KeyBanc, the ratings firm is worried about the U.S. carbon sheet market due to slowing in demand momentum and fourth-quarter supply risks, including stronger imports and a new potential U.S. producer.
The downgrade gave X stock options traders pause on Friday, as puts accounted for 53% of the more than 262,000 contracts traded on the session. What’s more, data from Trade-Alert.com highlights bearish October put position, where the trader purchased 15,810 $20 strike contracts for the ask price of $1.82, or $182 per contract.
X stock is currently pulling back to potential technical support in the $20 region, which is also home to the shares’ 50-day moving average. A breach of technical and trendline support in the area could spark a more sustained selloff for X.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
