U.S. stock futures are pointing toward a fourth day of gains for the major market indices, as Wall Street looks toward economic data and Federal Reserve speeches to shake off an apparent suicide bombing in Manchester, England. Minneapolis Fed President Neel Kashkari will meet with reporters on the bank’s opportunity and inclusive growth conference this morning, while Philadelphia Fed President Patrick Harker is slated to speak on economic outlook in New York.
Ahead of those speeches, however, the May PMIs for services and manufacturing will hit shortly after the open, as well as April new home sales data.
At last check, futures on the Dow Jones Industrial Average were up 0.21%, with S&P 500 futures rising 0.15% and Nasdaq-100 futures higher by 0.22%.
On the options front, volume declined sharply from the May expiration driven activity heading into Friday last week. Monday’s volume plunged to a more reasonable 15.4 million calls and 10.8 million puts yesterday. On the CBOE, the single-session equity put/call volume ratio fell to 0.54, while the 10-day moving average held at 0.62.
Leading Monday’s options activity, Bank of America Corp (NYSE:BAC) attracted heavy call volume after CEO Brian Moynihan pushed for easier mortgage lending regulations. Meanwhile, Apple Inc. (NASDAQ:AAPL) was also call option heavy following a Morgan Stanley report predicting heavy demand for the 10th anniversary iPhone. Finally, BlackBerry Ltd (NASDAQ:BBRY) remained a bullish favorite after inking a software deal with Ford Motor Company (NYSE:F).
Bank of America Corp. (BAC)
Trouble with the Donald Trump administration has hit Bank of America and the banking sector rather hard in recent weeks. Instead of retreating, however, BofA CEO Brian Moynihan has gone on the attack, calling for an easing of mortgage requirements to spark demand. According to Moynihan, if the 20% down payment requirement for mortgages were rolled back to just 10% it would allow more buyers to obtain affordable mortgages and boost business for banks.
Call activity has remained elevated on BAC stock despite the recent turmoil. On Monday, BAC saw volume approach 708,000 contracts, with calls making up 78% of the day’s take as options traders appear to bet on a rebound. Appearances, however, can be deceiving.
For instance, Trade-Alert.com data highlights two large blocks totaling roughly 34,000 contracts and 43,000 contracts traded on BAC’s August $26 call for the bid price of 16 cents and 18 cents, or $16 and $18 per contract. In other words, these BAC call option traders are either selling premium in anticipation of the shares never trading above $26, or are looking to take profits at $26 on existing stock positions. Either way, this is hardly bullish call activity.
Apple Inc. (AAPL)
Apple’s 10th anniversary iPhone, dubbed the iPhone 8, was back in the headlines yesterday (did it ever leave?). A new survey by Morgan Stanley suggests that Apple could have another major hit on its hands when the latest iPhone comes to market. The survey polled over 1,000 iPhone users and revealed that 92% intend on getting another iPhone in the next 12 months. Apple’s coveted 92% iPhone retention rate is the highest in the smartphone industry.
Call volume was strong following the report, with these typically bullish bets making up 66% of yesterday’s total volume of more than 680,000 contracts. Furthermore, the June put/call open interest ratio has begun to retreat under the weight of this added call volume, falling from 1.21 last week to today’s perch at 1.18 as calls are added at a faster rate than puts among front-month options. AAPL stock is once again flirting with the $155 region, and another breakout here could drive additional call activity on the shares.
BlackBerry Ltd (BBRY)
Once the king of the smartphone market, BlackBerry has now made a name for itself on the mobile security front. BBRY stock received a boost following last week’s WannaCry ransomware scare, being one of the few mobile software suites able to handle the virus. Yesterday, BBRY stock surged again after signing a software deal with Ford to expand the use of the QNX operating system to more vehicles.
BBRY stock options traders are chasing the latest surge in the shares, with Monday seeing volume top 269,000 contracts. Call were also dominant, accounting for an impressive 83% of the day’s take. Looking out to June, we find that this added call attention has pushed the put/call OI ratio down from a reading north of 0.90 in recent weeks to its current perch a 0.77.
While BBRY has already eclipsed heavy call accumulations at the $10 and $11 strikes, the most bullish traders are still waiting at the $12 strike, where more than 4,200 calls are now open.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
