U.S. stock futures are in rally mode this morning, with the major market indices on course to hit fresh record highs heading into the Thanksgiving holiday. Oil futures are providing a major boost to sentiment this morning after a Nigerian delegate said that OPEC will reach a deal to curb oil production later today. Meanwhile, retailers will be in focus ahead of Black Friday, and October existing home sales arrive as the lone economic report.
It was green across the board for futures at last check, with Dow Jones Industrial Average futures adding 0.25%, S&P 500 futures up 0.27% and Nasdaq-100 futures gaining 0.42%.
On the options front, volume came in well below average on Monday as traders begin to head out for the holiday weekend. Overall, 15.3 million calls and 12.9 million puts crossed the tape on Monday. Over on the CBOE, the single-session equity put/call volume ratio remained volatile, dropping to a one-week low of 0.57 after hitting a one-week high of 0.68 on Friday. The 10-day moving average continued to trek lower, hitting yet another three-month low of 0.60.
Turning to Monday’s volume leaders, Facebook Inc (NASDAQ:FB) saw call volume surge on a 4% rally in the shares following news of a sizable stock buyback. Meanwhile, GoPro Inc (NASDAQ:GPRO) puts gained considerable traction after the company announced additional reparations for buyers of the defective Karma drones. Finally, Advanced Micro Devices, Inc. (NASDAQ:AMD) extended its rally into four-year high territory in the wake of its cloud-server deal with Alphabet Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Google.
Facebook Inc (FB)
With the shares languishing in the wake of Trump’s U.S. presidential win, FB stock needed a shot in the arm badly. It got one yesterday, after the company announced it was buying back $6 billion in Facebook stock.
The board-authorized share repurchase program is set to begin in the first quarter and accounts for nearly 2% of Facebook’s total capitalization. Facebook also said it was working on dealing with several other key issues, including dealing with fake news headlines and misstated ad metrics.
The news was well received among options traders, which had begun to shy away from FB call options. On Monday, call activity returned to normal levels, accounting for 62% of the more than 933,000 contracts crossing the tape. That said, there is still some distance to go before the bulls regain their former influence in the options pits, as the November/December put/call open interest ratio stands at 0.88, up sharply from its typical range in the 0.60 to 0.65 region. Still, a little skepticism is healthy, and the unwinding of these bearish positions could push sidelined money back into FB stock.
GoPro Inc (GPRO)
As if the Karma drone recall wasn’t bad enough, GoPro has further undermined its revenue and earnings streams going forward. In addition to replacing the defective Karma drones, which lost power unexpectedly mid-flight and crashed, GoPro is now giving away its new Hero 5 cameras to all those who bought defective Karma drones. The Hero 5 was supposed to help lift GoPro’s revenue and earnings back to profitability following four-straight quarters of double-digit percentage losses, but those expectations are now likely as dashed as a fallen Karma drone.
GPRO stock options traders appear to be lowering their expectations following the news. On Monday, puts made up a whopping 86% of the more than 229,000 contracts traded on GPRO stock. What’s more, at least one trader placed a sizeable bet that the shares would fall below $6 per share. Specifically, more than 49,700 January 2017 $6 strike puts were bought to open for prices ranging between 5 cents and 23 cents per contract, according to OptionsMonster, with volume at the strike spiking to more than 27 times open interest.
Advanced Micro Devices, Inc. (AMD)
The Google-effect is still pushing AMD stock higher. The chip-maker announced last week that it had scored a position in Google’s cloud platform — a major win for AMD, which has had trouble breaking into the server market. AMD stock is now up more than 42% since Nov. 10 and the shares are looking to break out above $9 to territory last seen in March 2011.
Options traders have been all over AMD since the news, and Monday was no different. Volume swelled to more than 203,000 contracts, with calls snapping up 63% of the day’s take — well above historical norms for the shares.
What’s more, the November/December put/call open interest ratio has been steadily pushed south from its former range north of 1.10 to its current perch at 0.84, as calls are added at a considerably faster rate than puts among near-term options. A breakout above $9 could throw more gasoline on this fire, potentially pushing AMD toward double-digit prices before the end of the year.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
