After plunging on the open and spending most of the session in negative territory, the major market indices bounced back to breakeven Wednesday. China and its surprise devaluation of the yuan continued to dominate sentiment. Still, stocks proved resilient, with the S&P 500 eking out a gain of 0.1% on the day.
Option volume remained strong Wednesday, as puts continued to gain traction amid the turmoil. Overall, the CBOE’s single-session equity put/call volume ratio continued higher, tagging a two-week high of 0.83. The 10-day moving average came in at a one-month high of 0.74.
On the equity options front, Facebook Inc (NASDAQ:FB) saw volume creep higher after reports emerged that the company is working on a standalone mobile news app. Elsewhere, call options gained an edge on Cisco Systems, Inc. (NASDAQ:CSCO) ahead of the company’s fiscal fourth-quarter earnings announcement. Finally, AT&T Inc. (NYSE:T) made a rare appearance on the top 10 most active options list after the company boosted its 2015 earnings guidance.
Facebook stock currently sits at a technical crossroads, with the shares hovering just below resistance at $95 while its 10- and 20-day moving averages complete a bearish cross. The stock saw healthy buying activity Wednesday amid a broad-market selloff, as traders digested news that Facebook may be working on a standalone mobile news app as part of its Facebook for Business initiative.
While the new app is unlikely to stave off short-term weakness for FB stock all by itself, the news did prompt an increase in call speculation on the shares. On Wednesday, FB saw volume rise to 323,960 contracts, with calls snapping up 69% of the day’s activity.
Looking ahead to next week’s August expiration, peak put and call open interest are both positioned at the $85 strike, sporting OI of 65,253 contracts and 72,850 contracts, respectively. With FB currently trading near $95, the 43,776 calls at the $95 strike may have more of an impact on the security next week, and, in the event of a selloff, the 13,495 Aug $90 puts may also come into play.
Cisco Systems, Inc. (CSCO)
CSCO stock was unable to find positive purchase Wednesday, with the shares shedding nearly 0.5% heading into last night’s quarterly earnings report. The shares have traded in a tight range for the past several weeks, hovering between the $28 and $28.50 levels.
With earnings on deck, options traders favored calls over puts, albeit with some reluctance. Overall, more than 239,000 contracts traded on CSCO stock, with calls accounting for only about 54% of the day’s take.
Heading into last night’s report, peak weekly Aug 14 series call OI totaled 13,044 contracts at the $28 strike, while peak put open interest in the same series totaled 13,016 contracts also at the $28 strike.
Heading into the open, CSCO stock is up more than 3% after the company easily topped Wall Street’s expectations. For the record, Cisco said it earned 59 cents per share on $12.8 billion in revenue in the fourth quarter, above expectations for 56 cents per share on sales of $12.65 billion.
AT&T Inc. (T)
T stock fought its way onto the most active options listing on Wednesday, with 180,348 contracts changing hands on the equity. Calls barely edged out puts on the day, accounting for 51% of the day’s take.
Driving yesterday’s volume was AT&T’s updated 2015 forecast following the closure of its $48.5 billion acquisition of DirecTV (NASDAQ:DTV). AT&T said it now expected a full-year adjusted profit of between $2.62 and $2.68 per share.
Looking at August expiration next week, traders have loaded up on $36 strike calls, with more than 105,000 contracts currently in residence at this front-month strike. On the put side, the $34 strike is most popular, sporting OI of 31,235 contracts. T is currently trading south of both strikes.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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