U.S. stock futures are trading flat to lower in premarket trading, as traders weigh their options on weak economic data out of China and a fresh rise in crude oil prices.
Specifically, China’s industrial production and investment readings for April came in below expectations, while a Goldman Sachs report on oil has black gold trading nearly 2% higher at roughly $47 per barrel.
At last check, China is winning on Wall Street, with futures on the Dow Jones Industrial Average slipping 0.06%, with S&P 500 futures off 0.13% and Nasdaq-100 futures down 0.15%.
Options volume faltered on Friday, coming in well below average as corporate earnings begin to die down. Traders are turning their attention back to ETFs, with the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) attracting more than three million contracts in volume. On the CBOE, the single-session equity put/call volume ratio rose to 0.84, while the 10-day moving average held near its mid-February highs at 0.82.
In equity option news, Apple Inc. (NASDAQ:AAPL) saw a steep drop off in call option volume on Friday, as the shares look to breach key support at $90. Meanwhile, Bank of America Corp (NYSE:BAC) is also facing a breach of technical support, prompting a rise in put volume in the $14 region. Finally, Facebook Inc (NASDAQ:FB) was targeted by bullish comments from MKM Partners, which maintained its “buy” rating and boosted its price target.
Apple Inc. (AAPL)
AAPL stock dipped below $90 for the first time since 2014 on Thursday, prompting a flight to safety by options traders on Friday. Total volume came in at 1.8 million contracts, with puts snapping up 47% of the day’s take. AAPL has seen call volume steadily dwindle over the past month, with a poor quarterly showing in April all but sealing the deal.
The latest news driving a bearish wedge into AAPL’s sentiment backdrop was a report that the iPhone 7 would be just a refresh of the current iPhone 6 model. Analysts are already warning of falling demand for the iPhone, which could see a 20% to 30% year-over-year drop in production.
As for open interest levels to watch for AAPL, the May 20 series $90 strike will be the hot topic this week. Currently, more than 24,000 puts are open at this front-month strike, compared to just 10,200 call contracts. Above $90, the $91 strike sports 12,000 call contracts, while there are more than 15,000 put contracts located at $87.50.
Bank of America Corp. (BAC)
BAC stock is in a technical bind. The shares have given up support at $14, pulled their 10-day and 20-day moving averages into a bearish cross and breached key support at their 50-day moving average.
The catalyst for this decline? Negative interest rates around the globe are eating into investment revenue, while a sharp decline in IPO and M&A activity is also weighing heavily on BofA’s bottom line.
Options traders appear to remain somewhat hopeful, however, with calls making up 63% of Friday’s total volume of 553,000 contracts. While the $14 strike has seen considerable attention in the May 20 series, the $15 strike call has drawn the lion’s share of attention, with more than 213,000 contracts in open interest. The $15 strike is also home to peak put OI for the series, totaling roughly 128,000 contracts.
Facebook Inc (FB)
FB stock remains trapped below stiff resistance at $120, but that hasn’t deterred analysts at MKM Partners from weighing in on the shares. On Friday, MKM reiterated its “buy” rating on FB stock and boosted its price target to $150 from $135. According to MKM, Facebook is “benefiting from the still early shift in ad budget allocations from other media to mobile internet.”
The bullish commentary had little effect on Friday, however, as FB stock retreated back below $120. Meanwhile, options traders are beginning to lose their enthusiasm for FB calls. Call volume dropped to account for just 56% of the 428,000 contracts traded on FB on Friday — calls typically make up more than 63% of FB’s daily activity.
Looking at May 20 series expiration, peak call OI for the series totals more than 51,000 contracts at the $120 strike, but peak put OI numbers roughly 15,000 contracts at the $115 strike. A reversal to $115 this week could have significantly bearish implications for FB stock.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
