U.S. stock futures are set for a sharply higher open, as Wall Street looks forward to a wealth of economic data slated for release later this morning.
Headlining today’s flood is August’s retail sales, which many analysts will be watching for signs that may push the Fed toward raising rates sooner rather than later.
Also on the docket are weekly jobless claims, the August producer price index, the July current account figures, the Philly Fed manufacturing report, the September Empire State index, August’s industrial production and capacity utilization and July’s business inventories.
Rising above the tide this morning, futures on the Dow Jones Industrial Average have rallied 0.33%, with S&P 500 futures gaining 0.34% and Nasdaq-100 rising 0.35%.
Wednesday’s options activity continued apace with the recently ramped up activity ahead of the Federal Open Market Committee meeting next week. Overall, 15.9 million calls and 15.4 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio plunge to a two-week low of 0.55, nudging the 10-day moving average lower to 0.64.
Driving Wednesday’s options volume, Apple Inc. (NASDAQ:AAPL) is on fire this week due to rising sentiment on iPhone 7 preorders, which attracted bullish commentary from Morgan Stanley. Elsewhere, Wells Fargo & Co (NYSE:WFC) saw increased options action following reports that U.S. prosecutors are investigating the bank’s sales practices. Finally, Sarepta Therapeutics Inc (NASDAQ:SRPT) soared more than 26% on news that an outspoken critic of the company’s muscular dystrophy drug has left the FDA.
Apple Inc. (AAPL)
While the bar was set low heading into the iPhone 7’s release, early reports show that preorders are easily topping expectations. Tuesday’s report from Sprint Corp (NYSE:S) and T-Mobile US Inc (NASDAQ:TMUS) was followed up by bullish commentary from Morgan Stanley, which noted that only 25% of iPhone users need to upgrade to the iPhone 7 for sales to beat consensus estimates.
What’s more, AAPL stock may get another boost today after Apple said it has sold out of the larger iPhone 7 worldwide, and that the jet-black version of the standard iPhone 7 has also already sold out.
Options traders went gangbusters on the news, sending more than 4 million contracts across the tape on AAPL stock yesterday. Furthermore, calls gobbled up a hefty 71% of the day’s take, setting a near-term high for call option volume for Apple.
According to data from Trade-Alert.com, AAPL’s October $130 strike was among the most popular on the session, with at least two blocks (one totaling 16,000 contracts and the other 13,841 contracts) trading at this deep-out-of-the-money strike for the ask price of 26 cents, or $26 per contract. Open interest at the October $130 strike current numbers roughly 103,000 contracts.
Wells Fargo & Co (WFC)
WFC stock made an unusual appearance on the most active options listing on Wednesday, with traders responding to news that U.S. prosecutors are investigating Wells Fargo’s sales practices.
The U.S. Attorney’s Offices in Manhattan and San Francisco targeted Wells Fargo after a September 8 settlement for claims that some customers were pushed into fee-generating accounts they did not request.
Wells Fargo has already been hit by allegations that sales staff hit internal sales goals by opening more than two million bank accounts and credit cards for customers without consent.
Despite the bearish news, calls still managed to edge out puts in Wednesday’s session. Total volume rose to nearly 300,000 contracts, with calls accounting for 58% of the day’s take. Following a sharp pullback this week, WFC stock is now trading below all major put and call strikes, save the roughly 10,000 puts at the $46 strike in the October series. Heavy call OI, meanwhile, totals about 25,000 contracts at both the $50 and $55 strikes.
Sarepta Therapeutics Inc (SRPT)
Dr. Ronald Farkas is leaving the FDA for another job. By itself, this news is relatively innocuous, but when combined with the fact that Farkas led a critical FDA review panel on Sarepta’s Duchenne muscular dystrophy drug, eteplirsen, it adds up to a 26% rally for SRPT shares. Investors are betting that Farkas’ departure could open up a path toward approval for eteplirsen, despite reports that he was far from the only member of the FDA advisory committee that expressed concerns about the drug.
Option volume on SRPT spiked following the news, with more than 227,000 contracts changing hands. However, sentiment was near evenly divided among speculators, as calls only accounted for 52% of the day’s take.
Volatility for SRPT, driven by the nature of experimental biotechnology, has made a mess of the stock’s open interest configuration, with open contracts ranging from the $13 strike to the $43 strike in the October series. As such, despite SRPT jumping 27% and trading near $31, the shares still face peak October call OI of nearly 6,000 contracts at the $35 strike, with another 1,200 contracts at both the $40 and $43 strikes.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
