Thursday’s Vital Data: Wal-Mart Stores, Inc. (WMT), Apple Inc. (AAPL) and Netflix, Inc. (NFLX)

Blue chips dragged the major market indices lower on Wednesday, as weak guidance from Wal-Mart Stores Inc. (NYSE:WMT) sent a shockwave through the retail sector. Walmart’s warning called into question consumer strength and cast a pall on the rest of third-quarter earnings season.

On the day, the Nasdaq Composite fared well with a loss of only 0.29%, while the Dow Jones Industrial Average led the retreat with a drop of 0.92%.

Options volume remained strong on Wednesday, with puts gaining momentum amid tumultuous trading on Wall Street. As a result, the CBOE single-session equity put/call volume ratio moved off yesterday’s lows to finish at 0.75, while the 10-day moving average followed suit to close at 0.71.

On the equity option front, WMT made a rare appearance on Wednesday’s daily most active options listing after the company lowered earnings guidance. Meanwhile, Apple Inc. (NASDAQ:AAPL) saw a slight bump in call volume despite a new study by Piper Jaffray which confirmed that teens are not all that interested in the Apple Watch. Finally, Netflix, Inc. (NASDAQ:NFLX) option volume rose to a near-term high after the company’s third-quarter earnings, sales and U.S. subscriber growth figures came in lighter than expected.

10-15-2015 Top Ten Options

Wal-Mart Stores Inc. (WMT)

WMT stock is a virtual stranger to the most daily active options listing, which is why Wednesday’s short-term surge in activity was particularly notable. Driving the excessive volume was Walmart’s warning that earnings would arrive between $4.40 per share and $4.70 per share this year, with an expected decline of 6% to 12% next year. Walmart blamed the lowered guidance on wage increases for workers and heavy spending on e-commerce.

Overall, some 248,269 contracts traded on WMT stock, far above the security’s daily average over the past three months. Calls were the most popular contract, accounting for 61% of Wednesday’s activity and signaling that options traders may be looking for a rebound.

Looking at the October options series, WMT is trading well below all major accumulations of put and call open interest, with the $60 strike being the next major level to watch. Currently, 2,801 call contracts and 4,232 put contracts are open at the October $60 strike, though I would expected OI at this level and the $59-$59.50 levels to gain considerable attention through the end of the week.

Apple Inc. (AAPL)

It is becoming increasingly hard not to see the Apple Watch as a sign that the gadgets behemoth is losing touch with its core market. A recent survey by Piper Jaffray provided another log for the fire by reaffirming analyst fears that teens just aren’t that into Apple’s latest offering. While the survey notes that Apple remains the preferred brand among teens, those that plan to buy an Apple Watch has fallen from 17% in the Spring of last year to just 8% this Fall.

As I have noted in this space before, call volume has been on the decline for AAPL stock for a while now, undermining the share’s typically iron-clad bullish sentiment backdrop. On Wednesday, total volume came in at a robust 684,850 contracts, though calls managed just 56% of the overall take. Typically, AAPL calls account for nearly 60% of average daily volume, indicating that pessimism could be creeping up on the stock.

As for levels to watch this week, the October $110 strike should be front and center, with 29,982 calls and 45,261 puts in residence. Any rebound for AAPL will face stiff overhead resistance at $115, with 205,716 calls and 167,181 puts open at this strike in the October series.

Netflix, Inc. (NFLX)

After being hammered for a double-digit loss in after-hours trading last night, NFLX stock is on the mend heading into the open — down just 5.3% at last check, compared to a steep 14% decline after-hours on Wednesday. Netflix kicked off a selloff last night when it reported earnings of seven cents per share on revenue of $1.74 billion. Wall Street was anticipating eight cents per share on $1.75 billion in revenue.  

The light figures were underscored by U.S. subscriber growth of 880,000 customers, compared to growth expectations of 1.15 million. Better-than-expected international growth of 2.74 million subs has largely been overlooked by NFLX traders so far.  

NFLX option volume came in well above average heading into the report, with 364,898 contracts changing hands. Calls had a slight edge on Wednesday, comprising 55% of the day’s take.  

Looking at October OI configs heading into Friday’s expiration, NFLX has potential options-related support at the $105 put strike (21,931 contracts) and the $100 put strike (18,583 contracts). Meanwhile, heavy call OI at the $105 strike (21,538 contracts) could be a concern if $105 is breached, while a rally will face stiff OI at the $110 call strike (16,609 contracts).

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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