Another day, another direction change on Wall Street as stocks retreated in the wake of a poorly received Apple Inc. (NASDAQ:AAPL) press event and a 3% plunge in oil prices. All in all, the major market indices fell roughly 1.4% across the board, with the Dow Jones Industrial Average and the S&P 500 setting the tone for the pullback.
Option volume was once again light on Wednesday, though AAPL options were in hot demand. Overall, the CBOE’s single-session equity put/call volume ratio bounced to 0.71, while the 10-day moving average held firm at 0.74.
In equity options news, puts gained popularity on AAPL stock after the company’s product unveiling event landed like a wet towel and suggested to analysts that the Cupertino firm was running low on innovation. Elsewhere, Netflix, Inc. (NASDAQ:NFLX) caught bullish attention after announcing plans to expand into South Korea, Singapore, Hong Kong, and Taiwan by early 2016, and GoPro Inc (NASDAQ:GPRO) announced the limited release of its 16-camera 3D Odyssey system.
Apple Inc. (AAPL)
In 2007, Apple derided other smartphone and tablet makers by asking, “Who wants a stylus?” Yesterday, the company unveiled the Apple Pencil, a $99 stylus for the iPad Pro. Backing up this decades-old technology at the Apple press event were updates to the iPhone with the iPhone 6S and a new Apple TV, which many analysts believe is overpriced for the current set-top market.
AAPL stock responded to the event by falling 1.92% — a significantly uncharacteristic response to an Apple product launch. The shares managed to hold at support near $110, but the weakness prompted a jump in the number of AAPL put options traded on Wednesday.
Overall, volume rose to 1.5 million contracts, eclipsing AAPL’s two-week average. Additionally, puts volume snapped up 43% of Wednesday’s activity. While this reading would be low for other stocks, for call-prone AAPL, it was yet another indicator of rising bearish sentiment following yesterday’s event.
As for weekly Sep 11 series expiration tomorrow, AAPL traders will want to keep a close eye on the $112 and $113 call strikes and the $109 put strike. Each of these strikes sport open interest of more than 20,000 contracts and could create some options-related turmoil for the shares heading into the close on Friday.
Netflix, Inc. (NFLX)
Part oversold bounce, part expansion news, NFLX stock rallied nearly 4.5% on Wednesday after falling more than 20% from the start of September through Tuesday’s close. While concerns for increased State-side competition are growing, Netflix eased some investor revenue concerns by announcing it was expanding into South Korea, Singapore, Hong Kong and Taiwan by early 2016.
Options traders were somewhat moved by the news and the bounce, as volume on Wednesday pushed activity away from puts and back toward bullishly aligned call options. Overall, some 260,000 contracts traded on NFLX, with calls accounting for 55% of the day’s take. Naturally, traders will want to keep a close eye on the $100 level over the short term. Not only does this level hold psychological and technical implications for NFLX, it is also home to 5,146 calls and 2,901 puts in the weekly Sep 11 series of options.
GoPro Inc (GPRO)
GPRO stock has been blasted in the past several weeks, with the shares shedding more than 87% since Aug. 10. Yesterday, the stock plunged more than 10% after GoPro unveiled that Odyssey, its new 16-camera 3D rig designed for Google Inc’s (NASDAQ:GOOG, NASDAQ:GOOGL) Jump VR platform, would release with limited availability. Specifically, content creators and producers can apply to take part in the release and purchase Odyssey later this year.
It would appear that investors were either not happy with Odyssey’s limited release, or they were taking Baird Equity Research’s GPRO price-target cut and lowered fourth-quarter earnings expectations to heart.
In either event, the plunge and the news did not deter GPRO call traders. Volume came in at a relatively above average (for GPRO) 91,678 contracts. Additionally, 62% of the day’s activity was comprised of call contracts. After the drop, GPRO is now trading well below peak weekly September 11 series call and put strikes, with the 3,339 $37.50 September puts now trading firmly in the money.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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