U.S. stock futures are trading flat to lower this morning, as Wall Street entered a holding pattern ahead of today’s October non-farms payrolls and next week’s presidential election. With the Federal Reserve likely increasing interest rates at its December meeting, today’s jobs report will be closely scrutinized, as it’s the last major bit of economic data ahead of Tuesday’s election. Analysts expected 175,000 new jobs and an unemployment rate of 4.9%, but the economy added just 161,000 jobs.
Heading into the open, futures on the Dow Jones Industrial Average are off 0.12%, S&P 500 futures have fallen 0.06% and Nasdaq-100 futures have slipped 0.08%.
Puts remained in control during Thursday’s options activity, as 14.8 million calls and 17.4 million puts changed hands on the session. Over on the CBOE, the single-session equity put/call volume ratio retreated from yesterday’s five-month high to settle at 0.74, while the 10-day moving average continued higher to hit its own five-month high of 0.72.
Driving Thursday’s action in the options pits, Starbucks Corporation (NASDAQ:SBUX) issues a weaker-than-expected holiday outlook, but hiked its dividend by more than analysts were anticipating. Elsewhere, Fitbit Inc’s (NYSE:FIT) guidance and quarterly report reminded traders that everyone who wants a Fitbit likely already has one, while Ford Motor Company (NYSE:F) reported that October vehicle sales fell 11.7% year-over-year.
Starbucks Corporation (SBUX)
You would typically think that when things get uncertain, people will turn to comfort items to get them through the tough times. According to Starbucks, that isn’t quite true. While coffee is the lifeblood for many people, helping to drive Starbucks’ fourth-quarter earnings and revenue above Wall Street’s expectations, the company issued a cautious 2017 outlook due to uncertainty in the U.S. political climate. However, the company bolstered sentiment for SBUX stock by boosting its quarterly dividend 25% to 25 cents per share, above analyst expectations for a more modest hike.
Options traders had a bullish lean heading into Starbucks’ report, as calls accounted for 65% of the more than 350,000 contracts traded. That said, SBUX stock is set to open just shy of $52.50 this morning, putting the shares well short of the heaviest weekly Nov. 4 call open interest, roughly 10,500 contracts at the $54.50 strike. And, unless they are put sell positions, SBUX options bears will also be slighted, as peak weekly Nov. 4 series put OI of about 11,000 contracts rests at the out-of-the-money $51.50 strike.
Fitbit Inc (FIT)
According to Jim Cramer, “I think everybody who wants a Fitbit has one.” Following Fitbit’s disappointing third-quarter report and equally underwhelming guidance, no statement sums the company up better. FIT stock plunged more than 33% on Thursday after Fitbit forecast fourth-quarter revenue of $725 million to $750 million for the holiday shopping season, whiffing analysts’ estimates for $985.1 million.
Options traders appeared a bit more hopeful, as calls made up 59% of the 164,000 contracts traded on FIT stock amid yesterday’s plunge. The shares are now trading well below all major put and call open interest accumulations in the November and December series.
Looking out to December options, which expire on the 16th, the most active call is the $10 strike, with 600 contracts in OI, while the most active put is the $8 strike, also with about 600 contracts in residence. Peak OI for both puts and calls totals 1,200 contracts each at the well overhead $20 strike.
Ford Motor Company (F)
Ford stock has taken a beating in the past week, and looking at the headlines, it should come as no surprise. U.S. light-vehicle sales fell by 5.9% in October, with Ford seeing an 11.7% drop in overall sales. Ford branded sales were down 12.5%, while Lincoln sales actually rose 6.9%. The company did manage to post better-than-expected third-quarter results, with earnings of 26 cents per share and revenue of $33.3 billion both exceeding Wall Street’s estimates, but it was too little to rescue F stock.
Thursday’s options activity pointed to a mixed bag for F stock, with calls making up about 56% of the 190,000 contracts traded on the shares. Amid the flurry of trades, one interesting spread popped up on Trade-Alert.com.
Specifically, a trader bought 20,000 Nov. 18 series $11 strike puts while simultaneously selling 20,000 Nov $12 strike calls. This appears to be a collar strategy, where the trader is writing covered calls to collect the premium, but buying the puts to protect against a sharp drop in F stock. The total outlay for the position was 7 cents, or $7 per pair of contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
