U.S. stock futures are trading lower this morning, as Wall Street takes profits ahead of a long Memorial Day holiday weekend. Both the S&P 500 Index and the Nasdaq Composite hit record highs on Thursday, and with political tensions high in the U.S., traders aren’t taking any chances ahead of the weekend.
Against this backdrop, futures on the Dow Jones Industrial Average are down 0.15%, S&P 500 futures have shed 0.17% and Nasdaq-100 futures have given back 0.11%.
On the options front, volume surged on Thursday as traders positioned themselves ahead of the weekend. What’s more, today also marks the last options expiration of May, sparking additional jockeying activity among both investors and fund managers. In total, about 16.9 million calls and 14.7 million puts changed hands yesterday. On the CBOE, the single-session equity put/call volume ratio ticked lower to 0.59, while the 10-day moving average held at 0.61.
Heading up Thursday’s options activity, Qualcomm, Inc. (NASDAQ:QCOM) attracted a surge in call option volume ahead of today’s ex-dividend date, while Netflix, Inc. (NASDAQ:NFLX) was also call happy after a bullish note from Piper Jaffray. Finally, investors are wondering how much higher Amazon.com, Inc. (NASDAQ:AMZN) can go as the stock approaches the psychologically significant $1,000 level.
Qualcomm, Inc. (QCOM)
QCOM stock is down more than 1% in premarket trading this morning, as the shares trade ex-dividend today. Options traders piled into calls yesterday in a multitude of dividend capture strategies hoping to bank Qualcomm’s 57-cent-per-share dividend, which is payable to shareholders of record as of yesterday’s close on June 21.
Overall, QCOM saw volume top 375,000 contracts on Thursday, with calls making up an impressive 95% of the day’s take. Surprisingly, however, none of those calls were traded in blocks big enough to show up on Trade-Alert.com’s daily equity’s blocks filter. In other words, either institutional traders kept their activity small and under the radar, or yesterday’s volume was driven by smaller traders.
Netflix, Inc. (NFLX)
NFLX stock jumped more than 3.3% on Thursday after Piper Jaffray suggested that Wall Street may be underestimating Netflix’s international streaming potential. In a research note to clients, Piper Jaffray said that “If the international streaming business is anywhere close to the market share and margin levels achieved by domestic, then 2020 consensus EPS for Netflix would be ~100% too low.” The brokerage firm reiterated its “overweight” rating and boosted its price target to $190 from $166.
Options traders remained reserved, however, as calls only made up about 54% of the more than 298,000 contracts traded on NFLX stock yesterday. In fact, the June put/call open interest ratio comes in at 1.41, with puts easily outnumbering calls among near-term options. In short, NFLX options traders appear to be pricing in a reversal for Netflix stock, even as the shares look to establish support north of $160.
Amazon.com, Inc. (AMZN)
After rallying just more than 1.3% on Thursday, AMZN stock is now a hair’s breadth from breaking out above the psychologically important $1,000 level. The region has considerable implications for technical and sentiment traders alike, as a breakout could bring considerable volatility to AMZN stock over the short term. Wall Street, for instance, has a love/hate relationship with AMZN stock, since the company would rather spend heavily than stockpile cash.
Options traders, meanwhile, were leaning a little bullish on Thursday. Volume neared 528,000 contracts, with calls making up 60% of the day’s take. Overall, the June put/call OI ratio rests at a moderate 1.18, with puts naturally gaining more attention due to the elevated premiums on a nearly $1,000-per-share stock.
Peak call OI for the series naturally rests at the $1,000 strike, totaling more than 4,500 contracts, while peak put OI numbers 3,100 contracts at the deep out-of-the-money $900 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
