Thursday’s Vital Data: Ford Motor Company (F), Bank of America Corp (BAC) and Chesapeake Energy Corporation (CHK)

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U.S. stock futures are volatile heading into the open this morning. Another session packed with corporate earnings and economic data has Wall Street on edge, especially with an election less than two weeks away. Ford Motor Company (NYSE:F) headlines this morning’s reports, while weekly jobless claims, September durable goods orders and pending home sales top the economic calendar.

stock market todayHeading into the open, futures on the Dow Jones Industrial Average were last up 0.2%, while S&P 500 futures had added 0.33% and Nasdaq-100 futures had risen 0.4%.

Wednesday’s options activity returned to a more normal pace, with 14.4 million calls and 12.9 million puts changing hands on the session. On the CBOE, the single-session equity put/call volume ratio rose to a four-week high of 0.73, while the 10-day moving average edged higher to 0.64.

Driving Wednesday’s option volume, Ford saw mixed options activity heading into this morning’s reports, and rightly so, as the shares are down more than 1% following a 56% drop in net income. Elsewhere, Bank of America Corp (NYSE:BAC) remains a favorite interest rate play in the banking sector, but one major options trader is looking for a short-term reversal. Finally, Chesapeake Energy Corporation (NYSE:CHK) shares are trading at a critical technical juncture, and analysts and options traders are divided on how CHK will break.

Thursday’s Vital Options Data: Ford Motor Company (F), Bank of America Corp (BAC) and Chesapeake Energy Corporation (CHK)

Ford Motor Company (F)

The Big Blue Oval stepped into the earnings confessional this morning, and while things could have been worse, it still wasn’t pretty. Ford reported a 56% year-over-year decline in net income, with earnings coming in at 26 cents per share, six cents higher than the consensus.

However, revenue declined 6% to $35.9 billion, impacted by declining global deliveries and slow sales stateside. Ford reaffirmed its full-year 2016 guidance of $10.2 billion adjusted pretax profit, but analysts remain concerned that an interest rate hike could hurt global sales as the U.S. dollar strengthens.

F stock options traders were wary heading into this morning’s report. Total volume swelled to a near-term high of 238,000 contracts, with puts and calls in near parity on the session. Short-term call traders had their sights set on the $12 strike, where more than 31,000 contracts currently reside in the weekly October 28 series. However, put traders are set to bank profits this morning, with more than 20,000 contracts at both the $12 and $11.50 strikes in the same series.

F stock is off more than 1% premarket, hovering just below $11.75 at last check.

Bank of America Corp. (BAC)

While an interest-rate hike is sure to smack global U.S. manufacturers like Ford in the pocketbook, banking giants like Bank of America should be in for solid gains. Higher rates mean higher returns for the bank’s investment unit, which has stagnated in the current low-rate environment.

However, there are a few detractors when it comes to the presumed success of banking stocks, and one of those emerged in BAC’s options pits yesterday.

Overall, BAC saw 450,000 contracts trade on Wednesday, with puts taking a surprising lead with 59% of the day’s take. A large part of Wednesday’s put volume was comprised of one short-term bearish put spread. Specifically, data from Trade-Alert.com reveals that a trader opened a 34,620 contract bear put spread at the Nov $16/$16.50 strikes. The spread went off at the ask price of 13 cents, or $13 per pair of contracts.

Breakeven on the trade lies at $16.37, while a maximum profit of 37 cents per share, or $37 per pair of contracts, is possible if BAC closes at or below $16 when November options expire. In other words, this trader just made a rather sizable bet that BAC will drop about 5.5% in the next two-and-a-half weeks.

Chesapeake Energy Corporation (CHK)

Chesapeake Energy stock has had quite a few ups and downs this year. Year-to-date, CHK is up roughly 33%, but the stock is down 25% from its mid-September high as oil and gas prices have fallen. The stock is now perched on key support at $6 — a pivot point for CHK that could dictate its direction for the remainder of 2016, barring a rebound in energy prices.

Options traders have grown quite bearish on CHK stock recently, with their sights set on a decline heading into the new year on low oil and gas prices. Wednesday’s volume was indicative of their recent attitude, as puts made up 68% of the more than 205,000 contracts traded on CHK.

The $6 strike has, of course, attracted the most attention, sporting open interest of more than 10,000 contracts in the November series, and 2,500 contracts in December.

By contrast, analysts have come out heavily in support of Chesapeake Energy. Most recently, the company received a slew of positive comments and price-target hikes following Chesapeake’s analyst day on Oct. 21. Analysts’ pleas have fallen on deaf ears, however, as CHK continues to retreat.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/10/thursdays-vital-data-ford-motor-company-f-bank-america-corp-bac-chesapeake-energy-corporation-chk/.

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