U.S. stock futures are headed lower again as we head into another potentially volatile close to the week. Political concerns remain surrounding President Trump’s firing of FBI Director James Comey, as the White House’s story behind the firing changes under scrutiny. Meanwhile, retail sales for April are slated to hit the Street this morning, as well as earnings from J C Penney Company (NYSE:JCP).
Against this backdrop, futures on the Dow Jones Industrial Average have shed 0.01%, while S&P 500 futures are off 0.02% and Nasdaq-100 futures are up 0.11%.
On the options front, volume remained above average for the third consecutive session this week on Thursday, with about 16.8 million calls and 13.8 million puts crossing the tape. On the CBOE, the single-session equity put/call volume ratio rose to 0.65, while the 10-day moving average finally made a move after five dormant sessions, ticking lower to 0.65.
Driving Thursday’s options activity, Nvidia Corporation (NASDAQ:NVDA) drew record short-term volume after the company presented annual GPU Technology Conference, unveiling its $3 billion Tesla Volta server processor. Elsewhere, Tesla Inc (NASDAQ:TSLA) attracted mixed activity after the company officially released its new solar roof for preorder. Finally, J C Penney Company drew heavy put volume as pessimism mounted for the retail sector ahead of this morning’s quarterly earnings report.
Nvidia Corporation (NVDA)
Wednesday night at the annual GPU Technology Conference, Nvidia Chief Executive Office Jensen Huang unveiled what he called “the most expensive computer project the world has ever done.”
Based on the Tesla Volta server processor architecture, Nvidia’s Tesla V100 chip is the latest offering in the company’s rapidly expanding data-center business. The new chip also heavily leverages Nvidia’s market leadership and advances in AI and deep learning.
Options traders were already high on NVDA stock following the company’s blowout quarterly earnings report. On Thursday, traders sent another 1.05 million contracts across the tape for NVDA, with calls gobbling up 67% of the day’s take. Despite the recent call binge on NVDA, the stock’s June put/call open interest ratio remains elevated at 1.16 — likely a sign of profit taking from short-term speculators.
Tesla Inc (TSLA)
Tesla took the wraps off its new Solar Roof product on Wednesday, and the lower-than-expected cost surprised many analysts. Per the number crunchers over at Consumer Reports, the Solar Roof should cost only about $24.50 per square foot, after factoring in $2,000-per-year in electricity savings over 30 years and subtracting the cost of a Powerwall battery. Additionally, Tesla said the roof is guaranteed for the life of your home, or “infinity,” whichever comes first.
However, with TSLA stock trading near all-time highs, options traders remain reluctant to bet on a continued rise in the shares. For example, Thursday’s activity saw nearly 300,000 contracts change hands, and calls only made up 54% of the day’s take. In fact, the June put/call OI ratio has vaulted to within reach of an annual high at 1.37, with puts easily outstripping calls among back-month options. Skepticism amid a longer-term rally is healthy, but TSLA could find it difficult to convince these bears to switch sides at current valuations.
J C Penney Company (JCP)
After plunging more than 7.3% on Thursday, JCP stock is down another 8% in premarket trading this morning after first-quarter sales missed expectations. For the quarter, JCP said it earned 6 cents per share, beating estimates for a loss of 22 cents per share — however results included the sale of $125 million in assets. Meanwhile, revenue came in at $2.7 billion, well short of expectations for $2.8 billion. What’s more, same-store sales fell 3.5% for the quarter, completely whiffing Wall Street’s expected 0.7% drop.
Heading into the report, JCP options traders were loaded for bear. Volume topped 468,000 contracts, with puts snapping up 60% of the day’s take. What’s more, if JCP’s premarket losses carry over into the open, the stock will have plunged below all major put accumulations in the front three months of options, leaving little in the way of sentiment support for the stock.
Daring traders might consider betting on a “dead cat bounce” come Monday’s session, but the long-term outlook for JCP stock is not shaping up well at all.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
