Federal Reserve Chairwoman Janet Yellen is scheduled to speak on monetary policy later today, prompting the major market indices to enter a holding pattern on Wednesday. Wall Street continues to debate an expected interest rate hike this year, and many Fed watchers will be looking to gleam some insight from Yellen’s speech today. The results for stocks was flat to lower, with the Dow Jones Industrial Average slipping 0.31% and the Nasdaq Composite holding with a 0.08% loss.
Volume continued to decline in the options, with Wednesday’s activity bordering on summer-low territory. As a result of the low-volume session, volatility has crept into the CBOE’s put/call ratios. For instance, the CBOE’s single-session equity put/call volume ratio once again swung sharply lower, falling to 0.69 after hitting a one-week high on Tuesday. Leveling the playing field, the 10-day moving average held at 0.77.
On the equity front, analysts at UBS expressed concern that the new iPhone lease model could increase seasonality for Apple Inc. (NASDAQ:AAPL), while Cantor reaffirmed its “buy” rating on Netflix, Inc. (NASDAQ:NFLX). Finally, Freeport-McMoRan Inc (NYSE:FCX) saw a flood of call volume despite the stock being smacked lower by surprisingly weak Chinese economic data.
Apple Inc. (AAPL)
Since its announcement on Sept. 9, critics have hailed the new iPhone Upgrade Program as a way for customers to continuously upgrade their devices to the latest model. On Wednesday, analysts at UBS noted a potential concern for Apple, though, pointing out that the nature of the program could lead to increased seasonality with consumers waiting for new releases to upgrade. Despite the concern, UBS maintained its “buy” rating and $150 price target on AAPL stock.
Volume was anemic for AAPL options on Wednesday, with only about 389,372 contracts crossing the tape. While lighter than usual, call volume still maintained control in AAPL options pits, accounting for 54% of the day’s take. As the expiration of weekly Sep 25 series options closes in, traders will want to keep a close eye on heavy put OI at $110 (15,923 contracts) as well as heavy call OI at $115 (24,478 contracts), as these levels could bound the stock through Monday.
Netflix, Inc. (NFLX)
It’s been a rough month for NFLX, as shares are down about 20% since the middle of August. Still, analysts at Cantor Fitzgerald remain unperturbed by the losses, with the brokerage firm reaffirming its “buy” rating and $125 price target on NFLX stock yesterday. In a research note, Cantor cited Netflix’s 65 million users and “robust value” compared to competitors for the reiteration.
Options volume was below average for NFLX on Wednesday, with 103,271 contracts changing hands. Call volume was also lackluster, totaling just 52% of yesterday’s activity. Short-term traders will want to note that NFLX is staring up as some serious call open interest at the $100 (3,405 contracts) and $105 (4,874 contracts) weekly Sep 25 series strikes. This overhead call OI could limit any immediate upside for NFLX heading into Friday’s close.
Freeport-McMoRan Inc (FCX)
FCX stock made a rare appearance in Wednesday’s top ten most active options listing, as volume rose to short-term high levels. Nearly 75,000 contracts traded on FCX, and even though the stock plunged nearly 5.7%, calls captured an impressive 81% of the day’s take.
Like most materials stocks, FCX was punished for another round of poor Chinese economic data, which has sent copper prices down roughly 4% so far this week. For FCX stock, the news hit hard, sending the shares into single-digit territory for the first time since 2003.
The increased call volume on Wednesday suggests that options traders may be looking for an eventual rebound for FCX. For the immediate-term, peak September call OI totals 11,255 contracts at the $12 strike, while peak September put OI of 6,034 contracts is currently trading in the money at the $10 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
