U.S. stock futures are pointed higher again, as the Dow Jones Industrial Average looks to log its seventh straight positive session. The so-called Trump rally appeared to lose steam yesterday, when both the Nasdaq and the S&P 500 dipped into the red, but Wall Street is back on its feet this morning ahead of key economic data.
On tap are reports on October retail sales, October import and export prices, and the November Empire State Manufacturing Survey.
Heading into the open, futures on the Dow are up 0.1%, while S&P 500 futures have added 0.25% and Nasdaq-100 futures are up 0.58%.
Over in the options pits, volume remained well above average once again, with 20.4 million calls and 17.8 million puts changing hands. Monthly November options expire this Friday, so we could see this trend hold throughout the week. Over on the CBOE, the single-session equity put/call volume ratio bounced to 0.57, while the 10-day moving average dropped to another two-week low at 0.70.
Among Monday’s volume leaders, Apple Inc. (NASDAQ:AAPL) saw call volume jump even though the shares dropped 2.5% following through trade warnings from China. Similarly, Alibaba Group Holding Ltd (NYSE:BABA) saw Chinese rhetoric overshadow record Singles Day sales figures. Finally, Microsoft Corporation (NASDAQ:MSFT) call volume soared ahead of today’s ex-dividend date.
Apple Inc. (AAPL)
Apple has long fought to establish itself in the Chinese smartphone market — on of the biggest on the planet.
The company has had trouble gaining a foothold due to higher prices and lower cost knock-off models sold in the country. So, when the Global Times warned that China would halt iPhone sales if President-elect Donald Trump imposed a 45% tariff on Chinese goods, AAPL stock took a hit:
“If Trump imposes a 45 percent tariff on Chinese imports, China-US trade will be paralyzed. China will take a tit-for-tat approach then. A batch of Boeing orders will be replaced by Airbus. US auto and iPhone sales in China will suffer a setback, and US soybean and maize imports will be halted.”
Options traders appear to believe that threats of a trade war are overblown, judging by yesterday’s AAPL call activity. Volume soared to 1.3 million contracts, with calls claiming an above-average 64% of the day’s take.
What’s more, this rising preference for AAPL call options is widespread among near-term open interest, with Apple’s November/December put/call open interest ratio arriving at 0.66, with calls nearly doubling puts for the period.
Alibaba Group Holding Ltd (BABA)
Another stock taking a hit from trade-war blustering is Chinese online retailing giant Alibaba. Alibaba just posted record sales on Singles Day (China’s equivalent to Black Friday) of $17.73 billion, eclipsing last year’s total with more than nine hours to spare in the shopping day. Instead of rallying on the news, however, BABA stock dropped nearly 3.5% as trade tensions between the U.S. and China heated up.
BABA stock has been in a bit of a tailspin ever since Trump won the U.S. presidential election, mainly due to the President-elect’s stance on China. The negativity has already seeped into options sentiment, with Monday’s activity showing a declining preference for call options. Specifically, calls only made up 55% of the more than 347,000 contracts traded on BABA Monday, running counter to the overall bullish trend that had seen the stock’s November/December put/call OI ratio plunge to 0.55.
Look for this ratio to rise as puts gain favor heading into 2017 and Trump’s term as president.
Microsoft Corporation (MSFT)
MSFT stock has struggled alongside the rest of the tech sector following Trump’s win, with the shares down more than 4% since Nov. 8. Yesterday’s call activity, however, was not a sign that options traders are expecting a rebound anytime soon. Rather, the majority of yesterday’s wealth of call volume was centered on dividend capture strategies ahead of today’s ex-dividend date.
Shareholders of record as of the close last night are eligible for Microsoft’s quarterly dividend of 39 cents per share, payable on Dec. 8.
Overall, MSFT saw more than 463,000 contracts trade on Monday, with calls snapping up a hefty 83% of the day’s take — a vast majority of which traded deep in the money as part of dividend capture strategies.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
