U.S. stock futures are trading lower this morning as geopolitical concerns cast a shadow over the start of earnings season on Wall Street. News of a U.S. bombing run over Afghanistan and heightened tensions with North Korea rattled investor sentiment heading into the holiday weekend. What’s more, economic data is also front and center, with March retail sales logging their worst two-month stretch in two years and March consumer prices dropping for the first time in more than a year.
As a result, futures on the Dow Jones Industrial Average have fallen 0.11%, with S&P 500 futures down 0.12% and Nasdaq-100 futures off 0.07%.
On the options front, puts were in demand on Thursday ahead of the holiday break. Roughly 14.7 million calls and 15.6 million puts changed hands on the final trading day of last week.
Puts were also quite popular on the Chicago Board Options Exchange, where the single-session equity put/call volume ratio rocketed to a ten-month high of 0.96, pushing the 10-day moving average to a two-month high of 0.69.
Driving Thursday’s options volume, Tesla Inc (NASDAQ:TSLA) drew mixed activity after announcing it would unveil a new electric semi-truck in September and set the final unveiling of the Model 3 in July. Elsewhere, Advanced Micro Devices, Inc. (NASDAQ:AMD) launched its Ryzen 5 chipset to relatively positive reviews, but the stock sold off amid more profit taking. Finally, United States Steel Corporation (NYSE:X) was pressured as geopolitical concerns continued to take precedence over domestic infrastructure projects.
Tesla Inc (TSLA)
Tesla is nothing if not ambitious. Last week, TSLA hinted that it would be adding another vehicle to its stable, an electric semi-truck. Tesla CEO Elon Musk offered no details on the truck when he tweeted about the vehicle last week. Musk also noted that the company plans to unveil a pickup truck in 18 to 24 months, and set the final unveiling of the new Model 3 in July.
TSLA stock has come under considerable fire lately for valuation, and it’s beginning to impact options sentiment negatively. On Thursday, volume jumped to 648,000 contracts, with calls only making up 53% of the day’s take. April options expire this week, and you can see that short-term speculators are hedging their bets for a decline. Specifically, the April put/call open interest ratio currently rests at 1.15, with puts outnumbering calls among those contracts expiring this Friday. Currently, the $300-strike is home to both peak call OI and peak put OI, making this region a battleground for TSLA heading into the weekend.
Advanced Micro Devices, Inc. (AMD)
AMD launched its mid-range desktop processor Ryzen 5 last week to rather positive reviews. The latest in the Ryzen lineup is designed to offer a lower-cost alternative to its top-of-the-line Ryzen 7 chipset. However, AMD stock was still smacked sharply lower on the week, ending Thursday with a loss of more than 3.5%. The problem for AMD stock isn’t that the new Ryzen series isn’t selling well, it is. The problem is that many fund managers are afraid to miss out on taking profits, and are rolling those profits into undervalued stocks right now, according to CNBC’s Jim Cramer.
That said, AMD options traders aren’t ready to give up on the shares just yet. Thursday’s volume was call heavy, with these typically bullish bets accounting for 67% of the more than 353,000 contracts that changed hands. Furthermore, the May put/call OI ratio remains in bullish territory at 0.63, with calls easily outnumbering puts for the soon-to-be front-month series.
Currently, the $14 strike is the most popular among call traders, sporting OI of more than 23,000 contracts as traders look for another rebound in AMD stock.
United States Steel Corporation (X)
Materials traders are also holding out hope for a return to President Trump’s infrastructure promises, but those hopes may be fading fast. Take U.S. Steel’s recent price action. With Trump turning his attention to conflicts in the Middle East and North Korea, domestic infrastructure plans have taken a back seat, leaving X investors who were hoping for quick action to update the U.S.’s failing bridges and roadways in the lurch.
X stock plunged nearly 6% on Thursday, placing the shares down more than 26% since their February peak near $42.
Surprisingly, X options traders are clinging to calls despite the decline. In fact, calls made up 60% of Thursday’s volume of more than 247,000 contracts. Furthermore, the May put/call OI ratio has held relatively steady at 0.80 during the past week, even as the decline in X shares has picked up its pace. It will be interesting to see how long this optimism holds with X stock now trading below former technical support at $30.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
