Stocks have been on a roller-coaster ride this week, and the action looks like it will continue as we head into the weekend. After diving more than 1% across the board on Thursday, Wall Street is weighing bullish options while headed toward a sharply higher open this morning. At last check, U.S. stock futures on the Dow Jones Industrial Average were up 0.53%, S&P 500 futures had risen 0.60% and Nasdaq Composite futures were higher by 0.65%.
Options volume continued to be dominated by exchange-traded funds on Thursday, with traders seeking out longer-term stability amid this week’s volatility. Over on the CBOE, the single-session equity put/call volume ratio rose to 0.68, though the 10-day moving average extended its losses to hit a one-month low of 0.67.
In equity options news, Apple Inc. (NASDAQ:AAPL) was hit with a round of bearish analyst commentary after BTIG cut its price target due to lowered revenue expectations. Elsewhere, Bank of America Corp (NYSE:BAC) saw renewed options activity when Goldberg cut its earnings outlook for the company. Finally, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) call volume rebounded after the company cut a deal with creditors to extend the deadlines for its delayed regulatory filings.
Apple Inc. (AAPL)
With earnings season just around the corner, Apple is once again the center of attention for many analysts. On Thursday, analysts at BTIG maintained their “buy” rating on AAPL stock, but cut their price target to $130 from $141 on lowered revenue expectations. Specifically, BTIG believes that a return to revenue growth could be delayed until 2017, cutting its 2016 targets by 4%.
Options traders appeared to take the report in stride, as total volume rose to more than 1.1 million contracts on Thursday. Furthermore, calls snapped up 63% of the day’s take, falling in line with typically call activity for AAPL stock. Looking at today’s weekly April 8 expiration, the $110 call strike should be the center of attention, with its more than 20,000 contracts in open interest.
AAPL stock gave up key support at $110 on Thursday, with the decline taking the shares below their 10-day moving average in the process. Reclaiming $110 heading into the weekend would be a plus for AAPL bulls, but the fight will not be an easy one.
Bank of America Corp (BAC)
BofA was also targeted with an earnings revision on Thursday. Analysts at Goldberg reiterated BAC stock at “equal weight” with a $19 price target, but cut their first-quarter earnings-per-share target by 10 cents to 20 cents due to weaker capital markets and and higher credit costs.
After taking a breather for a few sessions, BAC options traders returned to form on Thursday. Total volume arrived at roughly 574,000 contracts, with calls making up 65% of the day’s activity.
The $13 strike will be the one to watch today as weekly April options expire. Currently, nearly 14,000 calls and 13,000 puts are open at the weekly April $13 strike, creating a potential sticking point for BAC heading into the weekend.
Valeant Pharmaceuticals Intl Inc (VRX)
VRX stock is began to bounce back this week, after Valeant inked a deal with creditors to extend its regulatory filing deadlines. As part of the deal, Valeant will pay a fee of $50,000 per $10 million in debt and be on the hook for 1 percentage point more in interest on its loans.
It was enough to satisfy VRX options traders, who returned to call trading on Thursday. In fact, calls made up 62% of the more than 473,000 contracts traded on Valeant yesterday, reversing the heavy trend toward puts over the past couple weeks.
As for today’s trading, keep an eye on the weekly April $36 strike, where calls and puts both number more than 3,300 contracts.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
