U.S. stock futures are pointed sharply lower this Monday morning, as Wall Street expresses a degree of nervousness ahead of tonight’s U.S. presidential debate. Tonight’s debate marks the first direct sparring contest between Hillary Clinton and Donald Trump of the election season, and it should prove to be more than interesting.
With uncertainty thick in the air, futures on the Dow Jones Industrial Average have fallen 0.52%, while S&P 500 futures have shed 0.43% and Nasdaq-100 futures are off 0.58%.
Friday’s options activity dropped off considerably compared to Thursday, yet volume remained well above average due to the expiration of weekly September 23 series contracts. Overall, 16.5 million calls and 15.1 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio rose to 0.65, while the 10-day moving average slipped to 0.64.
Setting the stage for Friday’s options volume, Twitter Inc (NYSE:TWTR) volume surged to a record high after CNBC reported the company had received several “expressions of interest” and may receive a buyout offer soon. Elsewhere, Facebook Inc (NASDAQ:FB) took a hit after The Wall Street Journal reported the company has been hugely overestimating viewing time for video ads during the past two years. Finally, Amazon.com, Inc. (NASDAQ:AMZN) broke out to new all-time highs after Argus upgraded the stock amid bullish commentary.
Twitter Inc (TWTR)
TWTR stock soared more than 21% on Friday following reports on CNBC that the company “has received expressions of interest from several technology or media companies and may receive a formal bid shortly.” CNBC named both Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) and Salesforce.com, Inc. (NYSE:CRM) as potential suitors, but said that those were just two names among many technology firms interested.
Naturally, Twitter stockholders are excited about the potential buyout — especially since TWTR stock is down more than 50% from its April 2015 highs. The news drove heavy options volume on Friday, setting a daily record at nearly 2.4 million contracts. Calls were the most popular contract on the day, with these typically bullish bets snapping up 71% of the day’s take.
The weekly September 30 series has been a hotbed of speculation following the report, with open interest at the overhead $23 strike call ballooning to nearly 21,400 contracts, while 13,300 contracts reside at the $24 strike call. Still, the September 30 series put/call open interest ratio remains a bit elevated at 0.71 — though that could shift sharply once a takeover bid is confirmed.
Facebook Inc (FB)
FB stock appearing on the daily most active options listing is far from unusual, but what was unusual was the attention to put options on Friday. Sentiment on FB stock took a serious hit after the Wall Street Journal reported that Facebook has hugely overstated video ad viewing times for the past two years. Facebook apparently fixed the reporting issue two weeks ago, but prior viewing time figures had been inflated by 60% to 80%. Facebook apparently told advertisers about the issue, and said that it did not affect the way it billed for advertising.
Still, the appearance of impropriety by Facebook was more than enough to send bears spilling into the options pits on Friday. More than 808,000 contracts traded on FB at the end of last week, with calls only eking out 53% of the day’s take — down sharply from an average north of 65% as put options gained considerable favor on the session.
Furthermore, FB’s September/October put/call open interest ratio continues to rise, hitting 0.88 on Friday as puts continue to be added at a faster rate than calls. A continued shift in sentiment could be an indicator of a top for FB stock.
Amazon.com, Inc. (AMZN)
AMZN is one stock that has yet to find a top. The shares vaulted toward another all-time high on Friday after analysts at Argus upgraded AMZN to “buy” from “hold” and said it was probably worth $1,000 per share. According to Argus, Amazon’s “growth engine” is “unmatched,” and the company’s growth prospects are accelerating faster than its share price.
Typically more conservative, AMZN options traders piled into calls during Friday’s session. Total volume rose to more than 244,000 contracts, with calls accounting for an above-average 59% of the day’s activity.
AMZN is now trading north of peak October call OI of 2,580 contracts at the $800 strike, with the next major options hurdle lying at $830, where 2,387 contracts currently rest, allowing for additional upside over the short-term before the stock hits significant resistance.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
