U.S. stock futures are pointed higher heading into the open this morning, putting the Dow Jones Industrial Average on course to potentially end a nine-session losing streak — its longest in six years — as the Donald Trump trade unwinds. There may still be some downside risk in the market, and stocks are down slightly this morning ahead of a trio of Federal Reserve speeches and economic reports including February Case-Shiller’s January home prices and February’s U.S. advance trade in goods.
Against this backdrop, futures on the Dow are down 0.11%, while S&P 500 futures have lost 0.11% and Nasdaq-100 futures have fallen 0.08%.
On the options front, volume was well below average on Monday, with only about 12.6 million calls and 12.3 million puts changing hands. On the CBOE, the single-session equity put/call volume ratio came in at a one-week low of 0.58, forcing the 10-day moving average down a notch to 0.66.
Driving Monday’s options volume, the implosion of the Trump-trade led banking stocks like Bank of America Corp (NYSE:BAC) and United States Steel Corporation (NYSE:X) sharply lower, but call options traders aren’t giving up yet. Meanwhile, Snap Inc (NASDAQ:SNAP) was inundated with fresh analyst coverage on Monday, driving a flood of call options activity.
Bank of America Corp (BAC)
Aside from the long-dollar trade, the banking sector trade has got to be one of the most crowded on Wall Street. And with Wall Street now second guessing the strength of the Trump trade, banking stocks have been hit hard, including poster-child Bank of America. In fact, BAC has shed some 9.5% since the GOP-led Congress failed to pass an Obamacare repeal as traders begin to fret that other Trump promises may be just as hard to come by.
But BAC stock options traders aren’t ready to give up just yet. On Monday, BAC saw volume arrive at 993,000 contracts, with calls snapping up 64% of the day’s take. What’s more, according to Trade-Alert.com data, one traders placed a rather large bet that BAC stock would rise back above $25 before May options expire.
Specifically, a block of roughly 12,700 May $25 calls traded at the ask of 26 cents, or $26 per contract, late yesterday. Breakeven lies at $25.26, meaning the trader is betting that BAC will quickly more than reverse its losses of the past several days.
United States Steel Corporation (X)
U.S. Steel is another Trump-trade darling, as the company was expected to benefit from Trump’s promise for $1 trillion in infrastructure spending. However, like BAC, X stock was hammered by healthcare, with the shares shedding nearly 15% since March 16. Once again, the failure of the GOP’s health care plan led traders to believe that the promise for additional infrastructure spending wouldn’t not materialize as soon, or as easily, as formerly expected.
Like BAC, though, X stock options traders are not yet ready to give up on the shares. Monday saw volume rise to more than 186,000 contracts, with calls making up 61% of the day’s take. Looking out to April, we still find considerable call accumulations, with the put/call open interest ratio arriving at 0.66. Currently, peak April call OI totals 16,000 at the $39 strike, though OI is building at the just overhead $35 strike, and now totals 12,900 contracts.
Snap Inc (SNAP)
The brokerage community apparently woke up Monday morning and decided to all initiate coverage on social media upstart Snap. A raft of ratings flooded SNAP stock Monday morning, with everyone from Goldman Sachs to Morgan Stanley and JPMorgan Chase issuing “buy” and “neutral” ratings. Among the more notable, Cowen & Co. and Credit Suisse doled out “outperform” ratings, while Oppenheimer started Snap at “hold.”
SNAP stock options traders appeared to side with the bulls, which was a no-brainer given the stock’s nearly 5% rise on the day. Total volume came in at 278,000 contracts, while calls made up 71% of the day’s take. That said, the bull trade is still far from crowded on SNAP, as the April put/call OI ratio of 1.13 indicates that puts still hold sway among near-term options traders.
That said, if SNAP can best short-term resistance in the $24-$25 region, it could convince more of these options traders to capitulate to the uptrend.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
