U.S. stock futures are retreating this morning, as Wall Street takes a breather ahead of a wealth of economic data, including key employment reports. Specifically, the ADP private-sector payrolls report and weekly jobless claims are due out today, followed by December’s non-farm payrolls report tomorrow. Meanwhile, the December purchasing manager’s index is also due to hit the Street later this morning.
Against this backdrop, futures on the Dow Jones Industrial Average have retreated 0.08%, S&P 500 futures have fallen 0.14% and Nasdaq-100 futures have dropped 0.18%.
On the options front, volume remained strong on Wednesday, with about 15.1 million calls and 12.1 million puts changing hands. On the CBOE, the single-session equity put/call volume ratio extended its recent decline to rest at 0.64, while the 10-day moving average held at 0.67.
Turning to Wednesday’s volume leaders, Bank of America Corp (NYSE:BAC) options traders are gearing up for next Friday’s fourth-quarter earnings report. Meanwhile, Tesla Motors Inc (NASDAQ:TSLA) came up short in full-year deliveries but was initiated at “buy” at Guggenheim, and Delta Air Lines, Inc. (NYSE:DAL) lifted its fourth-quarter passenger unit revenue.
Bank of America Corp. (BAC)
Ahead of the open next Friday, Bank of America will slip into the earnings confessional. Analysts are expecting a profit of 38 cents per share on revenue of $20.99 billion — up 40% and 7.3% year-over-year, respectively. Expectations appear to be a bit higher, however, as EarningsWhispers.com reports a whisper number of 39 cents per share for BofA earnings.
Options traders are also quite bullish on BAC stock. During Wednesday’s trading, speculative traders pushed more than 673,000 contracts across the tape on BAC, with calls gobbling up 73% of the day’s take. Among yesterday’s most interesting trades, however, was what appeared to be a short-strangle at the January 2017 20 series $22.50 and $23 strikes.
According to Trade-Alert.com, 10,000 contracts traded at each of the January $22.50 put and $23 call for the bid prices of 49 cents and 46 cents, respectively. Taking the trade at face value, the trader received a credit of 95 cents, or $95 per pair of contracts, which he will only keep if BAC stock closes between $22.50 and $23 when January options expire.
Tesla Motors Inc (TSLA)
Tesla had quite the busy day yesterday. The company said it delivered about 22,000 cars in the fourth quarter, bringing 2016’s total to 76,230 cars — short of the company’s forecast for 80,000 to 90,000. But that data was overshadowed by Tesla’s analyst day tour of its new gigafactory, which has now begun production. In response, analysts at Guggenheim initiated coverage on TSLA stock with a “buy” rating.
Despite the wealth of bullish data, options traders appeared to focus more on deliveries, as calls only accounted for about 53% of the more than 331,000 contracts traded on TSLA yesterday. With Guggenheim providing the second such bullish research note in the past two weeks, something’s got to give in TSLA’s options backdrop sooner or later, especially with the shares closing in on heavy January 2017 call OI at the $230 strike.
Delta Air Lines, Inc. (DAL)
Delta skies look a bit friendlier now, after the company lifted its fourth-quarter passenger unit revenue forecast yesterday. The news was followed by analysts at Cowen & Co. naming DAL stock a top pick while downgrading nearly all of Delta’s peers. “We believe investors will look to own shares that underperformed in 2016 given certain company-specific issues,” Cowen said in a research note.
Options traders were quick to jump on soaring DAL stock, as calls snapped up 83% of the 208,000 contracts traded on the shares.
Delta stock is now trading north of key January 2017 call open interest at the $50 strike, totaling more than 25,000 contracts. This region could now provide support for DAL going forward.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
