U.S. stock futures are trading higher once again this morning, as Wall Street maintains an optimistic tilt ahead of the third-quarter gross domestic product (GDP) reading. The U.S. economy is expected to have expanded by a rate of 2.9%, up from 1.4% in the previous three month period. Meanwhile, corporate earnings are also in focus, with Amazon.com, Inc. (NASDAQ:AMZN) providing disappointing results, while Google parent company Alphabet Inc (NASDAQ:GOOG, GOOGL) beat expectations.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.11%, with S&P 500 futures gaining 0.15% and Nasdaq-100 futures higher by 0.20%.
Thursday’s options activity came in slightly above average, with 15.6 million calls and 13.3 million puts changing hands on the session. On the CBOE, the single-session equity put/call volume ratio plummeted from Wednesday’s four-week high of 0.73 to a two week low of 0.55. As a result, the 10-day moving average fell to a two-month low of 0.62.
Driving Thursday’s option volume, Apple Inc. (NASDAQ:AAPL) saw call volume falter ahead of yesterday’s MacBook event, while Twitter Inc (NYSE:TWTR) drew mixed options attention following its layoff announcement.
Finally, Marathon Petroleum Corp (NYSE:MPC) reported an 84.7% plunge in quarterly profit, but call options traders appeared to focus on dividend capture strategies instead of earnings.
Apple Inc. (AAPL)
Yet another event falls flat for Apple. Yesterday’s MacBook Pro event left a flat taste on many analysts’ palettes, as the bulk of the announcement consisted of the usual incremental increases in MacBook performance with no major “must have” features in the offing. AAPL stock reacted by falling nearly 1% on Thursday, pushing the shares below former support at $15.
The drop below $15 leaves some 24,000 weekly October 28 series calls in need of a rally to realize a profit, which doesn’t seem likely at this point with AAPL stock down roughly 0.25% pre-market. However, the roughly 19,000 puts at the same strike could be in for an unexpected profit on the last trading day of the week for Apple.
As for yesterday’s options volume, AAPL saw roughly 1.1 million contracts cross the tape, with calls accounting for a below average 61% of the day’s take. Look for options activity to be heavy on Apple today, as traders either close out weekly options, or roll them forward in search of a better return.
Twitter Inc (TWTR)
The drama continues for Twitter. Earlier this week, reports surfaced that Walt Disney Co (NYSE:DIS) re-emerged as a buyer for the beleaguered social media company — with the report going as far as to say a price had already been agreed upon. Today, there is still no deal for TWTR. There are, however, job cuts on the horizon, as Twitter announced it was cutting 9% of its staff in a move to increase profitability.
Such moves are typically greeted with praise from the investing community, but Twitter stock sold off on the news as traders interpreted the development as another sign of weakness.
Even speculative options traders were shaken by this week’s developments. Total volume for TWTR options rose to an above average 792,444 contracts, with calls and puts nearly split down the middle. Overall, pessimism rules the roost among TWTR options traders, as the total November put/call open interest ratio has risen to 1.32, with puts easily outnumbering calls among options set to expire within the next month. Their target for November? The $12 strike, where peak open interest of nearly 16,000 put contracts currently reside.
Marathon Petroleum Corp (MPC)
Finally, Ohio-based Marathon Petroleum stepped up to release its third-quarter earnings yesterday morning, and logged an 84.7% year-over-year decline in profit. The company reported a profit of just 27 cents per share on revenue of $16.46 billion. Wall Street was expecting earnings of 81 cents per share and revenue of $17.18 billion.
However, Marathon also declared a quarterly dividend of 36 cents per share, payable on Dec. 12 to shareholders of record as of Nov. 14 (i.e., MPC’s ex-dividend date). It was this fact that options traders appeared to key off of, as calls made up a whopping 99% of yesterday’s total volume of 732,996 contracts.
Skimming yesterday’s biggest block trades via Trade-Alert.com reveals that most of MPC’s call activity took place at deep out-of-the-money strikes (the $50 and $60 strikes) in the January and April 2017 series, indicating that these were likely dividend capture plays.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
