U.S. stock futures started the morning lower once again today, as Wall Street weighs its options on the shifting possibilities for the looming Brexit vote … the market hates uncertainty. Stateside, May U.S. housing starts and building permits are due out later this morning, which should give economists something to chew on heading into the weekend.
Heading into the open, futures on the Dow Jones Industrial Average are off 0.10%, with S&P 500 futures down 0.19% and Nasdaq-100 futures lower by 0.10%.
Option volume exploded on Thursday, as traders positioned themselves ahead of today’s June 17 series expiration. Overall, 17.9 million calls and 18.3 million puts changed hands, and traders moved toward protection heading into the weekend. Furthermore, ETF volume dominated the session, with the SPDR S&P 500 ETF Trust (NYSEARCA:SPY) drawing volume of 8.1 million contracts (4.8 million puts).
ETFs typically gain attention in the options pits as traders seek out portfolio protection, and the SPY is among the most popular for such protection.
Turning toward the CBOE, put volume wasn’t anywhere near as heavy, but puts still gained considerable momentum. Specifically, the single-session equity put/call volume ratio jumped to 0.77 from 0.68 in the prior session. As a result, the 10-day moving average rose to a one-month high of 0.69.
In equity option news, analysts at JPMorgan cut their price target of Apple Inc. (NASDAQ:AAPL) on disappointing Apple Watch demand. Meanwhile, Oracle Corporation (NYSE:ORCL) reported fourth-quarter earnings and Facebook Inc (NASDAQ:FB) is seeing sentiment turn south.
Apple Inc. (AAPL)
Sentiment toward former Wall Street darling Apple continued to deteriorate this week. The week started off with a lackluster showing at WWDC, and culminated yesterday with a price-target cut from JPMorgan.
According to the brokerage firm, demand for the Apple Watch “just isn’t there.” JPMorgan cut AAPL to $105 from $125, noting that it now believes that Apple might sell 11.89 million Apple Watchs this fiscal year, down from its previous estimates for 23.5 million units.
While calls remained the most popular AAPL options yesterday, overall volume was seriously down from normal levels. Overall, around 1.03 million contracts traded on AAPL, with calls only accounting for about 55% of the day’s take, compared to an average of 62%.
Looking ahead to next week, peak June 24 series call OI totals 84,600 contracts at the $105 strike, with another 69,000 contracts at the $100 strike. Peak put OI for the series, meanwhile numbers 75,000 contracts at the $105 strike, with 61,000 puts open at $100.
Oracle Corporation (ORCL)
Options traders were uncertain heading into last night’s fourth-quarter report from Oracle. Overall volume came in at 270,000 contracts, with calls eking out 51% of the day’s take. Peak June 17 series call OI totals 22,000 contracts at the $41 strike, with 21,000 calls open at $40.
If these traders are sitting on bull call spreads at the $40/$41 strike, they may need some follow-through help from the broader market to push ORCL above $40 by the close. ORCL was last seen trading up 1.45% at $39.20 after fourth-quarter earnings came in light, but revenue beat expectations.
Specifically, Oracle earned 81 cents per share, missing expectations by a penny. Revenue soared to $10.59 billion on the quarter, however, topping expectations for $10.46 billion. Cloud software was the real winner for Oracle, as the unit saw sales grow 66%.
Facebook Inc (FB)
Is it time to short Facebook? That’s the question nearly everyone on Wall Street is asking themselves this week.
Whether it’s because the Facebook has grown too political, or technicals are pointing toward weakness (FB is finally rolling over from resistance at $120), or growing competition from the likes of Snapchat, FB stock is beginning to lose favor among many investors.
None of this negativity appears to be getting under the skin of FB options traders, however. On Thursday, more than 483,000 contracts changed hands on FB, with calls snapping up a whopping 66% of the day’s take. Additionally, FB’s June/July put/call open interest ratio continues to trend lower, arriving at 0.69 as of today — a reading in the lower half of its annual range.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
