U.S. stock futures are bouncing around breakeven this morning, as Wall Street searches for direction ahead of a session loaded with Federal Reserve speeches, economic data and an OPEC meeting.
Six Fed officials are scheduled to make speaking rounds today, with Fed Chairwoman Janet Yellen kicking things off at 10 a.m. Meanwhile, the Organization of the Petroleum Exporting Countries (OPEC) meeting is expected to come to a close today with no deal on a production freeze and August durable goods orders are slated to hit before the open.
With so much to digest, traders are gridlocked heading into the open. At last check, futures on the Dow Jones Industrial Average were up 0.07%, S&P 500 futures rose 0.03% and Nasdaq-100 futures were up 0.09%.
Tuesday’s options activity returned to normal levels following an eventful start to the week. An average 13.3 million calls and 11.8 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio fell to a one-week low of 0.62, dragging the 10-day moving average to its own one-week low of 0.63.
Providing fuel for yesterday’s options volume, Aetna Inc (NYSE:AET) announced that it will be giving discounts to some customers and employees on Apple Inc.’s (NASDAQ:AAPL) smartwatch. Meanwhile, Procter & Gamble Co (NYSE:PG) options remained on fire as the end date draws near for participation in the spinoff of its cosmetics division in a Reverse Morris Trust transaction. Finally, Facebook Inc (NASDAQ:FB) attracted more bullish commentary on Tuesday, this time from analysts at JPMorgan.
Apple Inc (AAPL)
Aetna said yesterday that it will be offering discounts and incentives for the Apple Watch to some of its customers and employees. The health insurer covers about 23 million people in the U.S., and is developing apps for medication reminders, prescription refills and doctor contacts.
Additionally, Aetna said the apps will help customers pay bills via Apple Wallet. About 50,000 employees will receive the Apple Watch at no cost.
AAPL options traders appeared to view the Aetna initiative as bullish for the stock, given the surge in volume on Tuesday. More than 630,000 contracts changed hands on AAPL, with calls accounting for about 58% of the day’s take. That said, call traders have been unusually quiet on AAPL lately, as the September/October put/call open interest ratio has risen to a reading of 0.93 during the past month.
Currently, all eyes are on the $115 strike, with more than 181,000 calls and 101,000 puts open at this front-month strike. AAPL flirted with $115 early last week, but the shares have yet to challenge this overhead resistance in any serious fashion.
Procter & Gamble Co (PG)
The deadline for getting in on P&G’s beauty products spinoff is fast approaching: midnight, Sept. 29. The blue-chip consumer good firm is divesting its global fine fragrances, salon professional, cosmetics, retail hair color and select hair styling brands (dubbed collectively as Galleria Co.) via a Reverse Morris Trust to avoid taxes. The recipient of Galleria Co. is none other than Coty Inc. (NYSE:COTY).
Both PG and COTY have seen massive options volume since the deal was announced, with traders employing options in arbitrage plays and as a means to get in on the deal without directly owning either PG or COTY stock. On Tuesday, PG saw more than 1.5 million contracts change hands, with both calls and puts splitting the activity, while COTY attracted 305,000 contracts, 57% of which were calls.
Most notable among PG’s spinoff-related trades on Tuesday were two blocks of 45,000 contracts that traded at the October 7 series $120 call and put strikes. According to Trade-Alert.com, the calls crossed at the bid of a penny, or $1 per contract, while the puts traded for the bid of $31.61, or $3,161 per contract.
Facebook Inc (FB)
FB stock continued to rake in the bullish accolades on Tuesday. This time, analysts at JPMorgan lifted their price target on the shares to from $170 to $175 while reiterating FB at “overweight.” The brokerage firm believes that Facebook will see ad revenue grow significantly as the company focuses on user experience and improves monetization. Messenger, WhatsApp and Oculus are also seen as major drivers for future revenue growth.
Unlike the dip in Monday’s FB call volume, options traders returned to form on Facebook yesterday. Total volume arrived at 430,000 contracts, with calls snapping up an above average 69% of the day’s take.
The $130 strike remains the center of attention for short-term speculators, with nearly 18,000 call contracts open at this strike in the weekly September 30 series. What’s more, there appears to be call spread activity at the Oct $130/$135 strike, with more than 47,000 calls open for each.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
