U.S. stock futures are trying to mount a comeback this morning, as the first interest-rate cut from the Bank of England in seven years is easing concern on Wall Street ahead of tomorrow’s July jobs data report.
Meanwhile, oil prices, which were credited for yesterday’s rally, are retreating this morning, down nearly 1% at $40.48 per barrel.
Against this backdrop, futures on the Dow Jones Industrial Average have added 0.13%, S&P 500 futures are up 0.12% and Nasdaq-100 futures have fallen 0.05%.
Options activity was flush with calls on Wednesday, as Wall Street took hope in better-than-expected jobs data from ADP. Roughly 16.1 million calls and 9.9 million puts changed hands, resulting in a rather bullish looking session from a sentiment standpoint. Calls were also popular over on the CBOE, as the single-session equity put/call volume ratio fell to a one-week low of 0.59. The 10-day moving average held at 0.66.
Driving yesterday’s equity options activity, Twitter Inc (NYSE:TWTR) call volume spiked following buyout rumors, while Tesla Motors Inc (NASDAQ:TSLA) puts were popular ahead of the company’s second-quarter earnings report. Finally, American International Group Inc. (NYSE:AIG) made a rare appearance on the top ten most active options listing following Street-beating second-quarter earnings.
Twitter Inc (TWTR)
TWTR stock surged 7.25% on Wednesday, after rumors surfaced that former Microsoft Corporation (NASDAQ:MSFT) CEO Steve Ballmer and Saudi investor Prince Al-waleed Bin-Talal were considering a partnership to buy the Twitter. That said, analysts at SunTrust Robinson Humphrey considered such a deal unlikely, as Twitter CEO Jack Dorsey isn’t looking to sell.
Riding the wave of speculation, options traders flooded TWTR stock with calls on Wednesday. These typically bullish bets accounted for a whopping 72% of the 618,000 contracts traded on TWTR. Looking at weekly August 5 series options activity, quite a bit of Wednesday’s volume may have been related to profit taking, with peak call open interest at the $17 and $17.50 strikes now trading in the money.
Meanwhile, it would appear that puts were added at the weekly August 5 series $17.50 put, with more than 2,000 contracts trading on OI of just 431 contracts. The weekly $17.50 put closed with an ask of 25 cents, or $25 per contract, putting breakeven at $17.25.
Tesla Motors Inc (TSLA)
TSLA stock was volatile in after-hours trading last night, as Wall Street attempted to digest a wealth of data from Tesla’s quarterly report. The company said it lost $1.06 per share in the quarter, more than double the loss Wall Street was expecting. Revenue came in at $1.56 billion, just shy of the consensus for $1.63 billion. Tesla also reaffirmed its goal to deliver 50,000 cars in the second half of 2016, despite missing its goal of 30,000 for the first half of the year.
TSLA initially moved higher following the report, as Tesla said it was ramping up production of its Model 3. The shares have since trended lower, confirming a bearish pre-earnings bias in the options pits.
Specifically, puts snapped up 51% of the roughly 255,000 contracts traded on TSLA yesterday. The most popular short-term strikes were the $200 and $210 weekly August 5 series puts, with volume topping 700 contracts each. Peak put OI for the series totals 3,240 contracts at the deep out-of-the-money $177.50 strike.
American International Group Inc (AIG)
AIG stock surged more than 7% on Wednesday, as traders cheered AIG’s promise to return roughly $25 billion to shareholders via share buybacks and dividends through 2017. By the numbers, AIG posted a profit of 98 cents per share, besting Wall Street’s target by five cents per share.
Options activity swelled to a near-term high of 154,900 contracts on AIG, with calls raking in 61% of the day’s take.
The shares are now trading well north of peak put and call OI in the front three months of options, leaving only technical resistance in the $60 region to stand in AIG stock’s way.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
