After rallying roughly 1.2% across the board on Wednesday, the major market indices appear poised for a lower open this morning. Stocks rallied yesterday after the Fed held steady on its no-interest-rate-hike policy, but noted that it may make a move during its December meeting. The eventuality of a rate hike must have finally settled in this morning, as U.S. stock futures on the Nasdaq Composite are off 0.55% at last check, with futures on the Dow Jones Industrial Average and the S&P 500 Index off by about 0.4%.
In options activity, calls dominated trading on Wednesday following the Fed’s announcement. In fact, the CBOE single-session equity put/call volume ratio plunged to a four-month low of 0.54, with call volume nearly doubling put volume on the session. As a result, the lately impassive 10-day moving average finally fell from its nine-session perch at 0.72, falling to 0.70.
Bank of America Corp (NYSE:BAC) saw unusually heavy call volume driven by the Fed’s indication that it may hike rates in December as well as a price-target increase at Oppenheimer. Elsewhere, GoPro Inc (NASDAQ:GPRO) options traders targeted calls ahead of third-quarter earnings, though the situation has gone south quickly this morning. Finally, Facebook Inc (NASDAQ:FB) options traders are ramping up call activity ahead of next week’s quarterly earnings report.
Bank of America Corp (BAC)
Driven by Federal Reserve indications of higher rates (and, thus higher investment returns down the road) and a price-target hike at Oppenheimer, BAC stock jumped nearly 5.4% on Wednesday. Oppenheimer lifted its 12-month target to $20 per share from $19 per share citing increased earnings potential for fiscal 2016.
Options traders have been high on BAC stock for a while now, but Wednesday’s volume was pushed well above average for the past month. More than 722,000 contracts crossed the tape on BAC stock, with calls gobbling up 78% of the day’s take.
As a result of Wednesday’s push, BAC is now trading north of heavy call OI accumulations at the $16.50 and $17 strikes in the weekly Oct 30 series. That said, BAC must still contend with about 23,700 call contracts at the $17.50 strike. While $17.50 could be a sticking point, a monthly close above $17 for October could be a coup for BAC bulls.
GoPro Inc (GPRO)
Apparently the situation at GoPro is more dire than many were expecting. With the stock down 50% during the past quarter, it appeared that “the worst” had already been factored in. GPRO stockholders found out otherwise after the close last night, with GoPro posting earnings of 25 cents per share on revenue of $400.34 million — results that missed Wall Street’s targets of 30 cents per share on revenue of $433.4 million.
In a statement following the report, GoPro founder and Chief Executive Nicholas Woodman noted that “Our business in the third quarter was clearly more difficult than anticipated.”
GPRO stock opened Thursday trading down nearly 17%, with the shares hovering just above $25 at last check. Options traders appeared to be caught off guard, as call accounted for 63% of yesterday’s volume of 158,246 contracts. Taking a look at the weekly Oct 30 series, options-related support appears thin for GPRO, as the stock has already blown through heavy put accumulations at the $28.50 and $25 strikes.
Facebook Inc (FB)
Social media giant Facebook will join the earnings parade on Wednesday next week, and FB stock options traders are already gearing up for the report. Some 252,600 contracts traded on FB stock yesterday, with calls snapping up 70% of the day’s take.
Focus is currently centered on the weekly November 6 series $100 strike, which sports call OI of 15,635 contracts and put OI of 7,157 contracts. Also of note are the $101, $102, and $105 call strikes, which each sport OI or more than 10,000 contracts.
As for Facebook earnings, Wall Street is expecting a profit of 52 cents per share on revenue of $4.36 billion. EarningsWhisper.com reports a whisper number of 54 cents per share.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
