Friday’s rally failed to carry over into Monday, as the major market indices slumped to start the week. The S&P 500 was the loss leader, dipping 0.51% on the day, followed by the Dow Jones Industrial Average. On the options front, traders remained mostly positive, with the CBOE put/call volume ratio rising slightly to 0.61, while the 10-day moving average edged higher to 0.65.
Among the day’s most active options, Netflix, Inc. (NASDAQ:NFLX) received a boost after analysts at Bank of America upgraded the stock to “buy,” while BlackBerry Ltd (NASDAQ:BBRY) shares surged on unfounded rumors of a potential buyout from Apple Inc. (NASDAQ:AAPL). Finally, Cisco Systems, Inc. (NASDAQ:CSCO) calls gained popularity ahead of the company’s third-quarter earnings report.
Netflix, Inc. (NFLX)
NFLX stock rallied nearly 3% on Monday as traders cheered an upgrade to “buy” from “underperform” at Bank of America. BofA cited strong subscriber growth and long-term earnings potential for the upgrade. BofA also more than doubled its price target to $722 from $350 per share.
Despite the praise, options traders’ optimism remained subdued amid elevated volume. On the day, 120,311 contracts traded on NFLX stock, with just 51% crossing on the call side. In the June series of options, NFLX’s overhead $610 and $615 strikes are the most popular, sporting open interest of 3,293 contracts and 3,430 contracts, respectively.
In premarket activity, NFLX is giving back some of yesterday’s gains, slipping 0.75% at last check.
BlackBerry Ltd (BBRY)
Wall Street loves rumors — especially those that sound like a solid exciting idea.
Yesterday, the Street was abuzz with musing that Apple was in talks to acquire BlackBerry as part of a push into the enterprise market. Despite a lack of evidence, BBRY shares soared nearly 6% on the rumors, and options traders jumped at the chance to speculate.
Overall, 142,008 contracts traded on BBRY stock, with a hefty 76% of Monday’s volume changing hands as call contracts. The activity furthers a recent trend for BBRY options, as increased call activity has pushed the stock’s May/June put/call open interest ratio lower over the past month to its current perch at 0.74. Currently, peak June open interest rests at the out-of-the-money $11 strike, totaling 21,757 contracts.
Cisco Systems, Inc. (CSCO)
Look for Cisco Systems to remain a hot topic among options traders today, as the company marches toward tomorrow afternoon’s third-quarter earnings report. Wall Street is looking for a profit 53 cents per share, but the whisper number currently rests at 56 cents per share.
Optimism may be on the rise for Cisco, with Pacific Crest upgrading CSCO stock to “overweight” from “sector weight,” while Raymond James lifted its price target to $33 from $30. On the other hand, Dan Nathan of CNBC’s Options Action noted some unusual call options activity on CSCO stock during Monday’s action, with a trader apparently selling 2,200 May $30 calls for 38 cents, or $38 per contract.
The $30 level is a breakout point for CSCO stock, and sold calls at this level may indicate a lack of confidence in the company’s quarterly results.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
