Wall Street faces an uncertain open this morning, as investors weigh their options ahead of a closely-watched Federal Reserve policy meeting later this week. The Bank of Japan will also offer up a monetary policy decision this week, while March new home sales data will hit the Street later this morning.
Heading into the open, U.S. stock futures on the Dow Jones Industrial Average were off 0.11%, with S&P 500 futures down 0.10% and Nasdaq futures lower by 0.09%.
Options volume was call-heavy on Friday, though most of that energy was directed at exchange-traded funds, and not individual equities. Over on the CBOE, the single-session equity put/call volume ratio dipped to 0.61, while the 10-day moving average held at 0.68.
In equity options news, Apple Inc. (NASDAQ:AAPL) remains the center of brisk options activity heading into tomorrow’s quarterly earnings report, though guidance has analysts at Merrill Lynch worried. Elsewhere, Baxter International Inc (NYSE:BAX) drew unusually heavy options activity heading into its own quarterly report, while Advanced Micro Devices, Inc. (NASDAQ:AMD) surged 52% after crushing first-quarter expectations.
Apple Inc. (AAPL)
Apple stock continues to retreat heading into tomorrow’s quarterly earnings report. Friday offered up another bout of selling pressure after Merrill Lynch cut its price target on AAPL from $130 to $125 on concerns about weak guidance and lagging iPhone shipments.
Still, options traders continued to pile into calls despite Apple’s recently weak price action. On Friday, calls accounted for 60% of the more than 1.2 million contracts changing hands on AAPL stock.
For call traders, the out-of-the-money weekly April 29 series $110 strike remains the center of attention, attracting open interest of more than 72,000 contracts. While put traders have also targeted the the $110 strike with more than 52,000 contracts, AAPL’s decline has drawn more than 12,000 puts to the April $105 and $100 strikes.
Baxter International Inc (BAX)
Healthcare firm Baxter International made a rare appearance on the top 10 most active options listing on Friday, with traders speculating heavily on tomorrow’s quarterly report. BAX stock saw record short-term volume of more than 1 million contracts, with calls and puts nearly evenly split on the session.
Baxter is expected to post a profit of 29 cents per share on revenue of $2.35 billion, though the whisper number comes in higher at 32 cents per share.
Open interest for BAX is relatively light in the weekly April 29 series, with the only notably activity totaling about 1,000 call contracts at the $44 strike. Back-month action, however, is considerably heavy, with more than 190,000 put and call contracts at each of the $55 strikes in the June series and more than 170,000 in the August series.
Advanced Micro Devices, Inc. (AMD)
After the close on Thursday, AMD posted a narrower-than-expected first-quarter loss and higher-than-expected quarterly revenue. But, while the quarter was clearly better than many were expecting, it was the AMD’s $273 million licensing deal with Chinese firm Thatic that drove much of Friday’s speculation on the stock.
Volume was well above average for AMD on Friday, with more than 330,000 contracts changing hands. Furthermore, calls accounted for a whopping 85% of the day’s take. AMD soared more than 50% on Friday, leaving put traders in the lurch, and putting the roughly 10,800 weekly April 29 series $3.50 calls well in the money.
This morning could be problematic, however, as AMD shares are off some 13%.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
