U.S. stock futures are trading cautiously higher this morning, as Wall Street recoups after Wednesday’s break in the post-election rally. Interest rates and inflation are in focus this morning, as Federal Reserve Chair Janet Yellen is set to testify before the Joint Economic Committee of Congress, while October consumer prices, housing starts, building permits and the November Philadelphia Fed manufacturing index are all on tap.
Against this backdrop, Dow Jones Industrial Average futures have edged 0.05% higher, with S&P 500 futures up 0.10% and Nasdaq-100 futures rallying 0.28%.
On the options front, volume continued its steady retreat from the past week’s elevated levels. On Wednesday, 16.1 million calls and 15.4 million puts crossed the tape, as activity resumed a more normal pace. As for the CBOE, the single-session equity put/call volume ratio bounced off Tuesday’s three-month low to arrive at 0.63, though the 10-day moving average continued to decline, falling to a one-month low of 0.63.
Among Wednesday’s volume leaders, Apple Inc. (NASDAQ:AAPL) received a boost after Target Corporation (NYSE:TGT) offered a bullish look at sales in its quarterly earnings report. Elsewhere, Advanced Micro Devices, Inc. (NASDAQ:AMD) call options soared on news that Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google is using AMD server graphics chips in its cloud computing platform. Finally, Cisco Systems, Inc. (NASDAQ:CSCO) is off sharply in pre-market trading as earnings guidance comes up short of Wall Street’s expectations.
Apple Inc. (AAPL)
AAPL stock received a much-needed boost yesterday, after Target noted in its quarterly earnings report that advance orders for Apple products were three times higher than last year heading into the holiday shopping season. AAPL stock was fresh off a test of support near its 200-day moving average, below which the stock has not closed a session since July. However, Apple’s rally came up just shy of key resistance at $110, and the shares are retreating from this region in pre-market trading so far this morning.
Options traders quickly jumped on yesterday’s rally, though many appeared to be fading the boost. Total volume came in at a near-term high of 1.9 million contracts, with calls only accounting for 57% of the day’s take — well below AAPL stock’s average daily call percentage in the 62% to 63% region. In fact, put open interest has grown considerably at the $110 strike, with more than 37,000 contracts currently open in the November 18 series, indicating a lack of confidence that AAPL will overtake this hurdle in the short-term.
Advanced Micro Devices, Inc. (AMD)
AMD scored a major win on Wednesday, as news broke that Google will use AMD ’s server graphics processing units in its consumer cloud services platform. AMD has had considerable success in the gaming console market in recent years, but has yet to significantly break into the server or cloud computing market. As such, the Google news could be game changing for AMD.
Options traders certainly think so, as volume surged to a near-term high of nearly 300,000 contracts. What’s more, bulls were in charge of the spike in volume, with calls accounting for 72% of the day’s take. That said, AMD is still trading shy of peak call OI in the December series, which totals more than 15,600 contracts at the $8 strike. More details on the Google front could provide the push AMD stock needs to put these calls in the money.
Cisco Systems, Inc. (CSCO)
CSCO stock has been a major benefactor of the Trump rally, but Cisco’s quarterly report suggests that it may not benefit as much as Wall Street was hoping. After the close last night, CSCO posted Street-beating quarterly earnings of 61 cents per share on revenue of $12.35 billion — analysts were expecting earnings of 59 cents per share on revenue of $12.33 billion. However, Cisco placed current quarter guidance in a range of 55 to 57 cents per share, well shy of Wall Street’s target for 59 cents per share.
CSCO stock is down more than 4% pre-market, and the shares appear poised to test support near $30 — a level Cisco has not closed a session below since July. Options traders were divided heading into the report, as the more than 297,000 contracts traded on CSCO stock were split down the middle between puts and calls.
Quite a few options traders may have been on the put-selling train ahead of last night’s report, as the November 18 series $30 strike sports OI of nearly 25,000 contracts. Unless the situation worsens when the market opens, or the broader market takes a dive, these November $30 puts should hold firm through the end close of trading tomorrow.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
