U.S. stock futures took a hit this morning, as Wall Street dealt with the shock and potential implications of a Trump presidency. Futures on the Dow Jones Industrial Average, S&P 500 and Nasdaq-100 were last off more than 2.2% across the board, with the Dow set to open more than 300 points lower.
Meanwhile, defensive investments are surging, with gold up 2.23% at $1,301.90 and the 10-year Treasury note up 3.33%.
Puts continued to lead in the options pits on Tuesday, with 13.3 million calls and 15.3 million puts crossing the tape. The CBOE saw similar activity, with the single-session equity put/call volume ratio ticking higher to 0.69, while the 10-day moving average held at six-month high levels at 0.75.
Driving Tuesday’s action in the options pits, Facebook Inc (NASDAQ:FB) is testing new features that target LinkedIn Corp’s (NYSE:LNKD) business model. Meanwhile, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) plunged nearly 22% following abysmal third-quarter earnings and 2017 guidance. Finally, Freeport-McMoRan Inc (NYSE:FCX) is bucking the downtrend as copper and gold prices drive mining stocks higher.
Facebook Inc (FB)
In an announcement late on Monday, Facebook said that it is testing features that would allow users to create job listings and receive applications, directly targeting LinkedIn’s bread-and-butter.
“Based on behavior we’ve seen on Facebook, where many small businesses post about their job openings on their Page, we’re running a test for Page admins to create job postings and receive applications from candidates,” a Facebook spokesman told Reuters.
The news did little to juice call option activity on Tuesday, however, as defensive posturing amid the U.S. election appeared to take precedence. Overall, over 481,000 contracts traded on FB yesterday, with calls squeaking by with 58% of the day’s take. With FB trading near $122, the shares are well below peak call open interest in the weekly Nov 11 series.
Peak put OI, meanwhile, rests just below FB stock, with more than 10,000 contracts at the $121 and $117 strikes. If the selloff deepens, we could see support at $120 and $121 tested before the end of the week.
Valeant Pharmaceuticals Intl Inc (VRX)
More troubles for Valeant emerged on Tuesday, as the stock plunged more than 21% after missing Wall Street’s third-quarter earnings targets. For the quarter, Valeant said it earned $1.55 per share on $2.48 billion in revenue, versus expectations for $1.75 per share and sales of $2.49 billion. The company also lowered its full-year guidance from a range of $9.9 billion to $10.1 billion in revenue to $9.55 billion and $9.65 billion.
Surprisingly, VRX call options were the most popular on the session. More than 533,000 contracts traded on VRX, with calls accounting for 59% of the overall total. Looking ahead to next week, call traders still need to realign their positions, as peak call OI totals some 15,000 contracts at the deep out-of-the-money Nov 18 series $35 strike.
Nearer the money, about 2,400 calls are open at the $15 strike. By contrast, roughly 7,700 puts are open at the $10 strike, as the bears look for additional losses for VRX.
Freeport-McMoRan Inc (FCX)
While the rest of the market struggles, defensive investments like gold and metals are headed sharply higher. The commodities rally has helped reverse fortunes for mining stocks, with options traders seeking out Freeport-McMoRan in particular. Copper prices, in particular, benefited FCX stock, with copper rising to nearly $2.38 per pound — near its highest levels of the year. Analysts also believe that copper prices could trade north $3 per pound due to improving market conditions.
Options traders were quick to jump on the rally, with calls making up 69% of the more than 249,000 contracts traded on FCX on Tuesday.
Following the stock’s two-day rally, FCX is now trading north of most major short-term call accumulations, creating an easier path higher for the time being. That said, there are some 41,000 call contracts open at the $20 strike in the November series. While this accumulation could create headwinds, FCX has ample room to rally before these calls could become a concern.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
