The major market indices banked their third-straight weekly gain on Friday, as Wall Street cheered the possibility that the Fed’s “easy money” policy could be around for a while longer. The S&P 500 led the way higher with a gain of 0.46%, while the Nasdaq Composite lagged with a gain of 0.34%.
October option expiration drove volume to above-average levels on Friday, with call options playing a dominant role. Specifically, the CBOE single-session equity put/call volume ratio plunged to a one-month low of 0.61, though the 10-day moving average held at 0.72.
On the equity option front, Twitter Inc (NYSE:TWTR) saw record short-term call volume after former Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer tweeted that he had snapped up a 4% stake in the company. Meanwhile, General Electric Company (NYSE:GE) stock was also targeted by brisk call volume on Friday, as investors piled on after the company’s stronger-than-expected third-quarter earnings report. Finally, Amazon.com, Inc. (NASDAQ:AMZN) options traders began jockeying for position ahead of the company’s Thursday afternoon earnings report.
Twitter Inc (TWTR)
Per a tweet on Friday morning, former Microsoft CEO Steve Ballmer has acquired a 4% stake in struggling microblogging site Twitter. At current market value, that places Ballmer’s TWTR holdings at roughly $800 million. The news was a major confidence boost for TWTR stockholders, and the shares jumped nearly 5% in the wake of the revelation.
Options traders joined the bullish stampede on TWTR. Volume eclipsed perennial options favorite Apple Inc. (NASDAQ:AAPL), with 687,907 contracts trading on TWTR. Calls dominated the landscape, accounting for 60% of Friday’s total volume on TWTR.
Looking at weekly Oct 23 series open interest, the $31, $31.50, and $32 strikes have become quite popular with call traders, sporting OI of 7,926 contracts, 4,104 contracts and 7,098 contracts, respectively. This setup could point toward a bit of range-bound activity for TWTR this week, with traders looking to consolidate their profits following last week’s gains.
General Electric Company (GE)
On Friday morning I noted that: “Unless GE breaks out of this tight range on the open, look for the shares to remain range-bound through the close this afternoon.” GE stock did indeed surge past the $27-$28 region which, due to heavy call accumulations in the expired October option series, could have been a headache for the shares. The stock is now flirting with $29, and could be set to hit new multiyear highs this week if momentum holds.
GE calls were quite popular on Friday, gobbling up 63% of the session’s total volume of 559,174 contracts. Admittedly, some of Friday’s activity is likely related to profit taking ahead of October expiration.
Supporting the profit-taking theory, put OI is dominant in the weekly Oct 23 series. Peak OI for the series totals 7,949 contracts at the $27.50 strike, while another 5,956 contracts are currently open at the deep out-of-the-money $26.50 strike. Meanwhile, out-of-the-money call OI in the series is light, with only about 2,850 contracts at the $29 strike, indicating low expectations for gains this week.
Amazon.com, Inc. (AMZN)
Amazon options traders are gearing up for Thursday’s quarterly report. AMZN stock made a rare appearance on the top 10 most actively traded options listing, with volume topping out at 135,410 contracts on Friday. Calls were the most popular heading into the weekend, snapping up 59% of the take.
For the record, Amazon is expected to post a third-quarter loss of 10 cents per share on revenue of $24.91 billion. EanringsWhisper.com reports that the whisper number comes in at a loss of seven cents per share.
Options traders have set their sights on the Oct 23 series $590 strike, with 1,678 contracts currently open at this out-of-the-money contracts. Put OI is extremely light for the series, with peak put OI totaling just 762 contracts at the $550 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
