U.S. stock futures are wavering this morning, reversing substantial earlier gains as the “Trump rally” appears to have finally run out of steam. Earnings season begins to die down this week, and there are no major economic reports slated for release this morning.
However, there is a slate of Federal Reserve speakers, with Dallas Fed President Rob Kaplan, Richmond Fed President Jeffrey Lacker and San Francisco Fed President John Williams all on tap for later today.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.39%, while S&P 500 futures are up 0.3% and Nasdaq-100 futures have fallen 0.11%.
Over in the options pits, Friday was another day of heavy trading activity. More than 20.4 million calls and 19.7 million puts crossed the tape heading into the weekend, driving by the expiration of November 11 series contracts. Call activity was also elevated on the CBOE, where the single-session equity put/call volume ratio retreated sharply to 0.53 — a four-week low. The 10-day moving average also ticked lower, hitting a two-week low of 0.72.
Among Friday’s volume leaders, Bank of America Corp (NYSE:BAC) call options traders flooded into BAC stock last week, driven by a mix of Trump’s anti-regulation rhetoric and an expected interest-rate hike from the Fed. Elsewhere, Facebook Inc (NASDAQ:FB) is facing backlash from the proliferation of fake news, and Nvidia Corporation (NASDAQ:NVDA) surged following blockbuster third-quarter earnings.
Bank of America Corp (BAC)
Bank of America call options are going gang busters as the stock breaks out to new highs not seen since 2010.
Trump’s presidency, which was supposed to bring unrest and uncertainty to Wall Street, has had the exact opposite effect — providing an extra oomph for the banking sector in particular. BAC stock traders are now hoping for a loosening of banking regulations and an interest rate hike from the Fed at its next meeting in December. All of this now has options bulls salivating over additional gains going forward.
For instance, BAC stock saw more than 2.1 million contracts change hands on Friday, with calls gobbling up 77% of the day’s take. The December and January 2017 $19 and $20 strikes have been the most popular, with Trade-Alert.com data revealing what appears to be calendar spread activity here. The largest blocks of BAC calls traded on the January 2017 $19 and $20 strikes, totaling more than 68,000 contracts each.
These trades were mirrored by smaller blocks of about 19,000 call contracts at the December $19 and $20 strikes. Both sets of blocks were marked “spread,” but without additional information, it’s impossible to tell the true nature of these trades — though calendar spreads are, by their nature, neutral to bullish trading strategies.
Facebook Inc (FB)
Facebook is not only dealing with tech-sector fallout from the Trump election — immigration policies are expected to impact hiring quality — the company is also fighting social media fallout from the proliferation of fake news stories on Facebook.com.
You may remember that a few months ago Facebook fired the team responsible for monitoring news stories on the site in favor of an automated system. Since then, the number of fake and bogus news stories has increased dramatically, with some of Facebook’s users accusing the company of influencing the U.S. presidential election.
CEO Mark Zuckerberg has said that most of the content on Facebook is “authentic,” but that the company will address the issue “soon and this kind of efforts often takes longer than we’d like in order to confirm changes we make won’t introduce unintended side effects or bias.”
For their part, FB options traders appear to be holding out hope for a rebound in the shares. Call volume began to ramp up once again in the latter half of last week. On Friday, more than 955,000 contracts traded on FB, with calls accounting for 62% of the day’s take — though this figure is still off Facebook’s typical daily call percentage of 64% to 65%.
Turning to the Nov 18 options series, the $120 strike has become the center of attention, with nearly 13,000 call contracts and 16,000 put contracts in residence. Peak call OI for the series rests deep out of the money at $130, totaling more than 24,000 contracts, while peak put OI for November numbers roughly 13,000 contracts at the $115 strike.
Nvidia Corporation (NVDA)
NVDA stock surged nearly 30% on Friday after Nvidia reported blow-out third-quarter earnings figures. For the record, Nvidia said it earned 4 cents per share on sales of $2 billion, compared to Wall Street’s expectations for earnings of 56 cents per share on sales of $1.69 billion. Nvidia also raised its dividend by 22% to 14 cents per share.
The results drew now fewer than eight upgrades or target-price increases from the brokerage community, helping to drive NVDA stock higher.
Options traders also piled on, chasing NVDA stock higher. Volume spiked to a near-term high of 423,000 contracts, with calls accounting for 55% of the day’s take.
As a result of Friday’s rally, NVDA is now trading well north of the most traded call OI and put OI strikes, but traders are adjusting quickly. Specifically, the Nov 18 series $90 strike saw OI balloon to more than 2,400 contracts. Expect more catch-up activity this week for NVDA.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
