U.S. stock futures are pulling back this morning, as President Donald Trump’s travel ban on immigrants from several predominantly Muslim countries cast doubts on further economic policies. The uncertainty has placed the Dow Jones Industrial Average’s tentative hold on 20,000 in question amid a flood of key corporate earnings this week.
Heading into the open, futures on the Dow Jones Industrial Average are off 0.3%, while S&P 500 futures have dropped 0.34% and Nasdaq-100 futures have fallen 0.35%.
On the options front, volume arrived below average on Friday, as about 14.4 million calls and 13.6 million puts crossed the tape. Over on the CBOE, puts gained traction ahead of the weekend, as the single-session equity put/call volume ratio jumped to a one-month high of 0.73, forcing the 10-day moving average to tick higher to 0.66.
Turning to Friday’s volume leaders, earnings was the major driver for several large tech names on the top ten most active options listing. Apple Inc. (NASDAQ:AAPL) reports after the close tomorrow afternoon, while Facebook Inc (NASDAQ:FB) will step into the limelight after the close on Wednesday. Finally, online retailing giant Amazon.com, Inc. (NASDAQ:AMZN) joins the fray after the close on Thursday.
Facebook Inc (FB)
FB stock saw a wellspring of call option activity on Friday at a time when many traders were seeking protection ahead of the weekend. Total volume on the stock rose to 755,000 contracts, with calls snapping up an impressive 71% of the day’s take.
Call buying was the order of the day, as traders appear to be anticipating a post-earnings rally from Facebook this Wednesday.
Following Friday’s close, the 3 Feb put/call open interest ratio slipped from 0.82 at the beginning of the session to 0.75 as calls were added at a faster rate than puts among options most affected by Facebook’s quarterly report — implying rising expectations for a bullish post-earnings move. Implieds are still pricing in a move of about 5.3% for FB stock, with the upper bound lying at roughly $139.50 and the lower bound resting at $125.50.
For the record, Facebook earnings are expected to rise nearly 66% to $1.31 per share, with sales soaring 45.4% to $8.49 billion. According to EarningsWhispers.com, the whisper number for Facebook’s fourth-quarter comes in at $1.37 per share.
Apple Inc (AAPL)
iPhone maker Apple is also on tap to release its quarterly report this week. Analysts are expecting a year-over-year decline of about 2% for Apple earnings, down to $3.22 per share from $3.28 per share a year ago. Revenue is expected to creep 2% higher to $77.38 billion.
Even speculative analysts remain reserved on Apple, as EarningsWhispers.com reports a whisper number of only $3.23 per share. That said, iPhone unit sales and guidance amid the current geopolitical climate could be the major drivers for any post-earnings reaction for AAPL stock.
As such, options traders appear to be playing it close to the vest on AAPL. Friday’s activity revealed a bit of trepidation, with calls accounting for a below-average 58% of the 637,000 contracts traded on Apple stock. The 3 Feb. options series also shows a bit of concern for AAPL’s earnings reaction, with the put/call OI ratio coming in at 0.74, slightly above Apple’s historic pre-earnings range nearer 0.70. Furthermore, peak 3 Feb. call OI rests at the in-the-money $120 strike, hinting at low expectations for AAPL stock.
Amazon.com, Inc. (AMZN)
Last, but certainly not least, Amazon.com will release its fourth-quarter earnings report after the close on Thursday, and it looks like even I underestimated AMZN stock’s potential. Several retailers have already reported this quarter, blaming lower-than-expected sales figures on slowing foot traffic, mainly due to the rising dominance of online shopping — a market in which Amazon commands 38% of the market share.
Still, AMNZ options traders appeared reluctant to jump on the bullish bandwagon on Friday. Total volume rose to 247,000 contracts, with calls only eking out 58% of the day’s take.
That said, peak call OI for the 3 Feb series totals 1,300 contracts at the deep out-of-the-money $900 strike, with another 1,200 contracts at the $870 strike. So, while volume remains a touch conservative, AMZN options traders still appear to have high expectations for a post-earnings rally.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
