U.S. stock futures are swimming in a sea of uncertainty and caution this morning. While the polls give Hillary Clinton a slight lead over Donald Trump in the U.S. election, Wall Street remembers Brexit all too well.
With nothing to do but wait for the outcome of today’s vote, futures on the Dow Jones Industrial Average have slipped 0.15%, with S&P 500 futures giving back 0.23% and Nasdaq-100 futures off 0.21%.
Puts maintained their lead during Monday’s session, though that lead narrowed considerably from the prior three sessions. Overall, 14.2 million calls and 15.1 million puts changed hands on Monday. Over on the CBOE, the single-session equity put/call volume ratio extended its decline, slipping to 0.68. The 10-day moving average, meanwhile, continued higher, hitting yet another six-month high at 0.75.
Driving Monday’s action in the options pits, Apple Inc. (NASDAQ:AAPL) enjoyed the relief rally on Wall Street yesterday, but election headwinds and concerns about Chinese growth limited enthusiasm in the options pits. Elsewhere, Bank of America Corp (NYSE:BAC) and other big banks could face break-up talk from the Senate if the Democrats gain the upper hand, while Barrick Gold Corporation (USA) (NYSE:ABX) plunged after gold prices suffered their biggest decline in five weeks.
Apple Inc. (AAPL)
AAPL stock added more than 1.4% on Monday, with the Wall Street relief rally and bargain hunting carrying the stock back above support at $110. But the shares are off more than a quarter-point this morning amid Brexit-style concerns for today’s election.
Additionally, longer-term concerns are also plaguing Apple, with investor concerns growing over the iPhone’s lack of growth in China.
As such, call volume, as a percentage of total volume, came in well below normal for the second-consecutive session in a row on Monday. By the numbers, total volume came in at 748,000 contracts, with calls only eking out 55% of the day’s take, down sharply from AAPL’s norm of 63%-64%.
Looking at weekly Nov 11 series open interest, call traders have set their sights on $113, where more than 16,000 call contracts have accumulated. Meanwhile, put traders are targeting the $107 strike, building OI to more than 10,000 contracts. The at-the-money $110 strike is split, with about 7,000 contracts on either side of the put/call line.
Bank of America Corp (BAC)
While the election brings uncertainty for many sectors, Bank of America and the banking sector could be the most impacted going forward … especially if the Democrats retake the Senate.
Breaking up the big banks has been a growing movement within the Democratic party for a while, and a majority in the Senate would give Democrat Sherrod Brown, chairman of the Senate banking committee, the support he needs to push such legislation to the forefront.
For now, the potential for an interest-rate hike in December is outweighing a potential Democrat majority in the Senate, at least among options traders. During Monday’s trading, some 625,000 contracts changed hands on BAC stock, with calls snapping up a sizeable 65% of the day’s take.
Zooming in for election expectations, the weekly November 11 series put/call open interest ratio rests at 0.88, with puts and calls in near parity. Implieds, meanwhile, are pricing in a potential 2.88% move for BAC stock by Friday, putting the upper bound at $17.49 and the lower bound at $16.51.
Barrick Gold Corporation (ABX)
While everything else was going up on Monday amid a broad rally on Wall Street, gold was going down. In fact, gold prices dropped 1.9% on the day — their biggest single-session decline in the past five weeks. As a result, gold-mining stocks were smacked sharply lower, with Barrick Gold shedding more than 5% on the day.
While other gold mining stocks were hit as hard or worse, ABX was among the most popular with options traders. More than 249,000 contracts traded on ABX, but options traders appeared more inclined to bet on a rebound as calls made up 60% of the day’s activity.
Despite the elevated call activity, two large put blocks were standouts on Trade-Alert.com’s most-active equity blocks screener.
Specifically, 7,500 Nov 18 series $17.50 strike puts traded at the same time as 7,500 $18.50 strike puts. While this activity appears to be the closure of a $17.50/$18.50 bear put spread, both blocks crossed between the bid and ask prices, making a definite determination impossible.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
