U.S. stock futures are up big heading into the open this morning, with the Dow Jones Industrial Average poised to jump more than 200 points. A shift toward support for the U.K. remaining in the E.U. emerged in the latest round of polls, lifting sentiment across the board.
Option volume on Friday appeared to be anticipating broad gains this week, as 18.6 million calls and 14.9 million puts changed hands on the session. Over on the CBOE, the single-session equity put/call volume ratio fell t0 a two-week low of 0.63, while the 10-day moving average held at 0.69.
In equity option news, Apple Inc. (NASDAQ:AAPL) is set to fall further this week as AAPL loses its weighting and is reclassified in the annual Russell index reconstitution. Elsewhere, Bank of America Corp. (NYSE:BAC) is up big in premarket trade on Brexit polls, making Friday’s BAC call activity smart money. Finally, Cypress Semiconductor Corporation (NASDAQ:CY) was flooded with calls on Friday, including a $23,000 bet on a rally past $12 by December.
Apple Inc. (AAPL)
The hits keep coming for AAPL stock.
The shares have been in a downward spiral for the better part of the past year. The weak Apple stock price action, as well as Apple’s lack of inspiring innovation, has prompted analysts to downwardly revise their outlook on AAPL. On Friday, more selling enters the picture, as the Russell indexes will conduct their annual reconstitution, a move that will see AAPL’s weighting fall to 2.52% from 2.77% on the Russell 1000 — prompting ETFs and indexes pegged to the Russell 1000 to sell the stock to match the lower weighting.
In the meantime, AAPL options traders appeared unfazed by the coming Russell reconstitution. Friday saw 1.4 million options change hands on AAPL, with calls accounting for 56% of the day’s take. What’s more, the two-week (June 24/July 1) put/call open interest ratio currently rests at a bullish reading of 0.65 — with calls easily outnumbering puts among short-term options.
Bank of America Corp. (BAC)
The shift in U.K. polling toward staying in the EU is lifting all boats this morning, and banking behemoth Bank of America is no exception. BAC could be set to retake $14 today if early morning euphoria carries over into the open, with the stock up more than 2.5% at last check.
BAC has been hit hard lately due to the lack of movement on monetary policy and interest rates at the Federal Reserve, but alleviation of the Brexit worries could provide significant lift for BAC.
Options traders appeared to be on the ball on Friday, with a wealth of call options arriving as smart money given this morning’s rally. Overall, some 562,000 options traded on BAC at the end of last week, with calls snapping up 65% of the day’s take. Volatility is unusually high this week for BAC, with weekly June 24 series implieds pricing in a 4% move — placing the upper bound at $14.06 and the lower bound at $12.94.
Cypress Semiconductor Corporation (CY)
With practically no news driving the shares, CY stock jumped some 3.21% on Friday. The shares have been hot lately, rallying more than 25% since mid-April, recouping a portion of their 33% plunge since March last year. Judging from Friday’s options activity, at least one CY options trader believes the recent bounce higher is just the tip of the iceberg.
CY saw record short-term volume on Friday, with more than 303,000 contracts changing hands. Even more impressive was that calls made up nearly all of Friday’s activity. Delving into data from Trade-Alert.com reveals that one trader made a rather large spread bet at the December $12/$14 strikes.
Specifically, the trader bought a block of 56,000 December $12 calls for 55 cents while simultaneously selling a block of 70,000 December $14 calls for 10 cents.
The total outlay (assuming these blocks represent the entire trade), comes out to $2.38 million with a maximum profit of $8.12 million if CY closes at $14 when December options expire.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.