U.S. stock futures are headed higher this morning, as earnings start to roll in from the financial sector. Bank of America Corp (NYSE:BAC) call options were smart money, as BofA put in a solid fourth quarter, with JPMorgan Chase & Co. (NYSE:JPM) following suit. Meanwhile, the retail sector will be in focus, as December retail sales and producer prices reports are on tap later this morning.
Against this backdrop, futures on the Dow Jones Industrial Average have gained 0.07%, S&P 500 futures have added 0.06% and Nasdaq-100 futures have risen 0.13%.
On the options front, volume was brisk on Thursday heading into the blitz of financial sector earnings. Overall, roughly 14.5 million calls and 14.4 million puts traded yesterday. Over on the CBOE, the single-session equity put/call volume ratio remained volatile, hitting a one-week high of 0.68 and pushing the 10-day moving average back to two-month high territory at 0.67.
Turning to Thursday’s volume leaders, Bank of America options volume surged ahead of earnings, with call activity bolstered by an upgrade at Societe Generale. Elsewhere, Apple Inc. (NASDAQ:AAPL) saw a wealth of bad news yesterday, capped by a U.S. appeals court’s reviving the iTunes store antitrust lawsuit. Finally, Fiat Chrysler Automobiles NV (NYSE:FCAU) was accused by the Environmental Protection Agency of cheating on emissions testing, a la Volkswagen AG (ADR) (OTCMKTS:VLKAY) style.
Bank of America Corp. (BAC)
Ahead of this morning’s quarterly report, Societe Generale upgraded BAC stock (and several other banking sector names) to “buy” stating that the “Trump Effect” will increase interest income, lower corporate taxes and allow for the company to bring excess capital back stateside.
Initial numbers from Bank of America’s fourth-quarter report show that the company earned 40 cents per share, topping expectations for 38 cents per share. Revenue rose to $19.99 billion, but came up shy of expectations for $20.85 billion.
In premarket trading, BAC stock is down 0.7% as Wall Street digests the report.
Options traders were heavily bullish ahead of the report. Total volume on BAC yesterday came in at 1.2 million contracts, with calls snapping up 70% of the day’s take. Short-term expectations appear rather lofty, with peak 13 Jan call open interest totaling 76,000 contracts at the $24.50 strike.
Closer to home, the 13 Jan. $23 strike calls sport OI of more than 49,000 contracts.
Apple Inc. (AAPL)
Apple was hit with a wealth of negative headlines on Thursday. The most significant was a U.S. appeals court reviving a consumer antitrust lawsuit alleging Apple monopolized the iPhone app market by not allowing users to purchase apps outside the App Store.
Reports also surfaced that Mac sales continued to stagnate in the fourth quarter, and billionaire investor Peter Thiel confirmed that the age of Apple was over, telling the New York Times that “We know what a smartphone looks like and does. It’s not the fault of Tim Cook, but it’s not an area where there will be any more innovation.”
In typical style, AAPL options traders remained optimistic on the shares. Volume rose to 774,000 contracts on Thursday, with calls accounting for an above-average 68% of the day’s take. AAPL traders are already gearing up for the company’s quarterly report on Jan. 31, with 3 Feb series implieds pricing in a potential post-earnings move of nearly 5% for the shares. The upper bound currently rests at $124.80, while the lower bound lies at $113.20.
Fiat Chrysler Automobiles NV (FCAU)
Taking a page out of Volkswagen’s playbook, Fiat Chrysler has been accused by the EPA of using onboard software to cheat U.S. emissions testing. The accusations affects some 100,000 vehicles sold stateside since 2014. Fiat has said it will fight the claims, but investors are already spooked, sending FCAU more than 10% lower yesterday. The stock is off another 2% in premarket trading this morning.
Options traders came in on both sides of the fight in droves, sending FCAU’s total daily volume to a record short-term high of more than 216,000 contracts. Volume was nearly split down the middle, with puts eking out a slim majority at 52% of the day’s take.
Current peak Jan. 2017 OI levels for FCAU rest at the $11 strike call, with more than 10,000 contracts, and the $10 strike put, where some 10,600 contracts reside. FCAU is currently hovering near $9.75 in premarket trading.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
