U.S. stock futures are pointing higher again this morning, as Wall Street bulls wonder if there really is a Santa Claus for the Dow Jones Industrial Average this year. The Dow is poised to make another run at 20,000 today, if futures hold into the open, and Dow 20K has been the talk of the financial media of late. But the blue-chip barometer’s intraday trend has been lower for the past week, leaving many on the Street to wonder if Santa is coming this year.
At last check, futures on the Dow were up 0.17%, while S&P 500 futures had added 0.21% and Nasdaq-100 futures had risen 0.16%.
On the options front, volume fell off sharply on Monday, as traders began to head home ahead of the holidays. Only about 14.1 million calls and 12.7 million puts changed hands on Monday, and we can expect volume to continued to die down heading into the weekend and throughout next week.
Oddly enough, however, the lower volume has led to a rise in put activity on the CBOE, as traders eek protection ahead of the holiday break. In fact, the single-session equity put/call volume ratio jumped to a two-month high of 0.71 yesterday, prompting the 10-day moving average to tick higher off its two-year low to arrive at 0.57.
Turning to Monday’s volume leaders, Microsoft Corporation (NASDAQ:MSFT) has attracted technical buyers, profit taking and rollouts in the options pits after holding above former resistance this week. Meanwhile, Alibaba Group Holding Ltd (NYSE:BABA) is attempting to address its image problem by cracking down on fake reviews and Walt Disney Co (NYSE:DIS) stock is going rogue after Star Wars rakes in $155 million over the weekend.
Microsoft Corporation (MSFT)
Despite a lack of significant headline news, Microsoft has attracted considerable attention in the options pits for the past several trading days. This time around, it’s technical. MSFT stock drew in buyers when the shares rebounded off its 50-day moving average back in early December, and the rally gained additional legs after breaking above formerly staunch resistance in the $62 to $62.50 region.
As a result, options traders now appear to be taking profits and rolling positions higher. On Monday, MSFT saw volume swell to more than 386,000 contracts amid light total market activity. Calls made up a whopping 77% of the day’s take, with the January 2017 and February $62.50 strikes seeing heavy activity. According to Trade-Alert.com, one trader appeared to close out a block of 30,000 January $62.50 calls for a bid of $1.34, while another trader opened a block of 11,800 February $62.50 for the ask of $2.34.
Profit taking at this point should be expected, especially ahead of the holiday break. But the added call buying activity has bullish implications for MSFT stock going forward.
Alibaba Group Holding Ltd (BABA)
One tech stock not feeling the holiday spirit is Alibaba. The Chinese internet portal giant has an image problem with fake reviews and fake product purchases, which BABA is now taking legal action to remedy.
“Alibaba wasn’t as stringent about brushing before its IPO, but it’s really cracked down on the malpractice in the past year,” Guotai Junan Securities analysts Ray Zhao told Bloomberg, “It’s quite essential for the company to maintain its credibility and keep the system healthy as they want to attract larger and high quality brands.”
BABA stock has certainly felt pressured by these growing pains, with the stock falling nearly 18% from its September peak. Recent tensions between President-elect Trump and Beijing haven’t helped matters either.
But BABA options traders remain optimistic, with calls accounting for 68% of Monday’s total volume of 178,000 contracts. What’s more, the January 2017 put/call open interest ratio for BABA has fallen from readings north of 0.96 in recent weeks to its current perch at 0.85. With BABA currently perched on support at its 200-day moving average, options traders appear optimistic for a rebound.
Walt Disney Co (DIS)
Disney’s latest Star Wars blockbuster, Rogue One: A Star Wars Story, raked in more than $155 million over the weekend to become the second biggest December opening in history. (If you haven’t seen Rogue One, and are a Star Wars fan, I highly recommend it.) Build up to the film’s release was palpable on Wall Street, as DIS surged toward record highs and challenged resistance near $105 — ultimately breaking this technical barrier following the box office results.
DIS options traders are betting on additional gains before all is said and done with Rogue One, with calls snapping up 73% of the more than 173,000 contracts traded on Monday. For the short-term, the weekly December 23 series $106 and $107 call strikes have attracted more than 2,000 contracts each, with traders appearing to bank on call spreads during the lead up to the holiday break.
Now, if only Disney can do something about its flailing ESPN subscriber numbers, the stock could have some real upside ahead of it.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
