U.S. stock futures are headed higher this morning, as Wall Street bounces back from heavy losses driven by President Donald Trump’s latest crisis — the Department of Justice has appointed a special prosecutor in the Russia investigation. Strong economic data has assuaged most of those wounds, but the major market indices are still down nearly 1% across the board for the week.
At last check, futures on the Dow Jones Industrial Average were up 0.17%, with S&P 500 futures rising 0.3% and Nasdaq-100 futures higher by 0.39%.
On the options front, volume remained brisk and well above the average on Thursday, with about 19.3 million calls and 19.2 million puts changing hands as traders continue to seek protection in exchange-traded funds. On the CBOE, the single-session equity put/call volume ratio ticked lower to 0.70, pushing the 10-day moving average to a fresh one-month low of 0.62.
Leading Thursday’s options activity, Alibaba Group Holding Ltd (NYSE:BABA) created a considerable stir with its fourth-quarter earnings report, which many assumed missed expectations at first glance. Elsewhere, Nvidia Corporation (NASDAQ:NVDA) scored a price-target increase at UBS and a late initiation from Bernstein after the close last night. Finally, Pandora Media Inc (NYSE:P) may be an acquisition target after reports stated the company turned down a bid from Sirius XM Holdings Inc. (NASDAQ:SIRI).
Alibaba Group Holding Ltd. (BABA)
BABA stock initially plunged nearly 2% after Alibaba released its fourth-quarter earnings report.
The Chinese e-commerce giant said that revenue rocketed 60% higher year-over-year to $5.6 billion, a feat achieved by few companies in the past. However, there was some confusion over earnings, which rose 45% to 63 cents per share, missing the consensus by 2 cents. After accounting for increased taxes, adjusted earnings were determined to have actually beat expectations.
Options traders weren’t fooled, however, as calls claimed 72% of the more than 850,000 contracts traded on BABA stock. The shares recovered by the close of the session, adding roughly half-a-percent. Overall, Alibaba’s June put/call open interest ratio reflects continued bullish sentiment for the stock, arriving at 0.54, with calls nearly doubling puts among near-term options.
That said, peak call OI for the series still lies at $115, with another heavy dose of calls open at the $120 strike. In short, there is still room for these bulls to adjust their targets higher.
Nvidia Corporation (NVDA)
NVDA stock has been red hot since its blowout earnings report — the recent Trump-plunge notwithstanding. Yesterday, the shares gained renewed momentum after UBS lifted its price target to $148 from $135 and reiterated its “buy” rating. Furthermore, Bernstein initiated coverage on NVDA stock at “outperform” and a $165 price target. Bernstein noted that AI and data center computing could be huge for Nvidia.
Options traders agreed, sending an influx of call activity across the tape for NVDA stock. More than 569,000 contracts traded yesterday, with calls making up a hefty 71% of the day’s take. Looking out to June reveals that there is still more than a little bearish sentiment left to wring out of NVDA, however, with the put/call ratio coming in at 1.27.
Most of these puts, however, are well out of the money, and could be evidence of put selling activity, with traders looking to cautiously bank premium instead of betting bullish on NVDA in the current market environment.
Pandora Media Inc. (P)
Merger and acquisition activity is swirling around online music streaming firm Pandora this week. According to The Wall Street Journal, the Sirius bid could value P stock as high as $12 to $13 per share, but nothing official is in writing as of yet. P stock jumped more than 5% on the news yesterday, with online music streamers still struggling to realize a profit, merger and acquisition may be the best bet for shareholders.
Speculation surged in the options pits for P stock yesterday, with calls making up 82%o of the more than 418,000 contracts traded on the shares — a near-term high.
According to Trade-Alert.com, several large blocks of out-of-the-money calls crossed at the bid late in yesterday’s trading, with the largest being roughly 33,000 contracts crossing on the January 2018 $15 call for the ask price of 25 cents, or $25 per contract.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
