U.S. Stock futures are facing a triple whammy this morning, and the Dow is headed for a triple-digit loss on the open. Weak Chinese economic data, a bomb test in North Korea and crude oil dipping to a decade low below $35 per barrel have all worked in concert to push Wall Street into a bearish mood this morning.
Heading into the open, futures on the Dow Jones Industrial Average are off 1.45%, S&P 500 futures are down 1.53%, and Nasdaq Composite futures have shed 1.74%.
Options activity was relatively average on Tuesday, with calls gaining traction after Wall Street rebounded from its lows of the day to finish mostly positive. Given how futures are trending this morning, expect this to change dramatically today. Overall, the CBOE single-session equity put/call volume ratio retreated to 0.65, pulling the 10-day moving average lower to 0.68.
Turning to news driving equity option activity, Apple Inc.’s (NASDAQ:AAPL) leading mobile competitor, Samsung Electronics Co Ltd., projected poor performance in 2016 due to a weakening global economy, once again raising the specter of potentially light iPhone sales. Meanwhile, Sanofi SA (ADR) (NYSE:SNY) dumped MannKind Corporation’s (NASDAQ:MNKD) Afrezza inhalable insulin drug due to poor sales, while Walt Disney Co (NYSE:DIS) was downgraded at Macquarie due to cord-cutting concerns with flagship sports network ESPN.
Apple Inc. (AAPL)
Citing a weakening global economy and increasing competition for chips and smartphones, Samsung on Monday said it sees a weak business environment in 2016. According to analysts like those at JPMorgan, this warning underscores their projections for weak Apple iPhone sales for the March quarter, and possibly beyond. Lowered iPhone sales projections have taken Wall Street by storm during the past couple months, dragging on AAPL stock and lowering enthusiasm among options traders.
Speaking of which, Apple call volume continued to degrade in Tuesday’s trading action. Overall volume came in at a respectable 1.3 million contracts, though calls only accounted for 58% of the overall take. Typically, AAPL call volume comes in north of 61% on an average trading session.
Looking at weekly Jan 8 series options, traders holding $100 strike Apple puts and calls will be on edge today. The stock is down nearly 2.5% in premarket trading, and AAPL hasn’t closed a session south of the century mark since the fourth quarter of 2014. Currently, there are 2,316 calls and 12,007 puts open at the weekly Jan 8 series $100 strike, which could make things interesting today.
MannKind Corporation (MNKD)
Citing poor sales, French drugmaker and Afrezza marketing partner Sanofi has decided to stop selling the inhalable insulin drug for MannKind. The rights to Afrezza return to MannKind within the next 90 to 180 days, but the reaction was immediate, with MNKD stock plunging nearly 50% on Tuesday. While MannKind is reviewing its options, analysts are concerned that the drug may now be dead in the water.
Driven by the news, MannKind options traders flooded the stock with record short-term volume. More than 336,000 contracts traded on MNKD stock yesterday, with calls managing to snag 59% of the take. Most of the attention was focused in the Jan 15 series, with the $1.5, $1 and 50-cent strikes seeing a marked increase in traffic. Currently, peak Jan 15 call OI totals 106,950 contracts at the $5 strike, while 54,167 represent peak put OI at the $2 strike.
Walt Disney Co (DIS)
While the force is clearly with DIS stock lately, cord cutting at ESPN is clearly channeling the dark side for the company. At least, this is how analysts at Macquarie see things, as the firm downgraded DIS to “neutral” from “outperform.” According to Macquarie, the new Star Wars movie was the stock’s biggest catalyst, and now that the movie event has passed, ESPN’s flagging subscriber numbers will once again become a lodestone for the shares.
Cloudy the future is, but slow options traders it does not. More than 201,000 contracts traded on DIS following the downgrade, with puts pulling in 56% of the day’s take. As for weekly Jan 8 series OI, DIS is set to open south of some 7,000 put contracts at the $100 strike. Another 7,777 puts are open at the January $98 strike and, if DIS succumbs to additional selling pressure today, we could see these puts trade in the money very soon.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
