U.S. stock futures are trading flat to lower this morning, as Wall Street eyes today’s release of the latest Federal Reserve policy meeting minutes for signs of a potential rate hike. So far this week, both New York Fed President William Dudley and Atlanta Fed President Dennis Lockhart hinted at the potential for the Federal Reserve to lift interest rates at least one more time this year.
So far, Wall Street remains apprehensive of a hike, with futures on the Dow Jones Industrial Average off 0.08%, S&P 500 futures down 0.05% and Nasdaq-100 futures essentially flat with a gain of 0.01%.
Options activity slowed to a more normal pace on Tuesday, with about 13.1 million calls and 11.8 million puts changing hands on the session. A decline in call volume helped push the CBOE single-session equity put/call volume ratio higher to a four-week high of 0.70, while the 10-day moving average fell to 0.59 — its lowest point since July 22.
Driving yesterday’s options activity, Warren Buffett’s Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) disclosed that it boosted its stake in Apple Inc. (NASDAQ:AAPL), while Chesapeake Energy Corporation (NYSE:CHK) rallied after crude oil prices gained for a fourth-straight session. Finally, Hain Celestial Group Inc (NASDAQ:HAIN) stock shed more than a quarter of its value after the company delayed its quarterly earnings report.
Apple Inc. (AAPL)
There is a minor battle of the major investors going on right now, and their playground is AAPL stock. Late on Monday, Warren Buffett’s Berkshire Hathaway said that it increased its stake in Apple by 55%, even as other big players George Soros, Carl Icahn and Leon Cooperman cut their holdings. According to the regulatory filing, Berkshire owned 15.23 million AAPL shares as of June 30, up from its prior holdings of 9.81 million shares.
Ichan said he dissolved his stake in AAPL in April, while George Soros and Leon Cooperman (Omega Advisors Inc) announced their exodus of AAPL stock on Monday.
The news comes as AAPL stock takes aim at overhead resistance at $110 — a technical hurdle that has attracted a wealth of options open interest. Speaking of which, roughly 1.1 million AAPL options contracts traded on Tuesday, with calls snapping up an unusually large portion of the day’s take — about 69%.
Open interest at the $110 call strike continues to grow, hitting nearly 49,000 in the August 19 series and nearly 70,000 in the Sep 16 series. The September series also sports roughly 71,000 call contracts at the $115 strike, creating another layer of potential options-related resistance for AAPL going forward.
Chesapeake Energy Corporation (CHK)
Rising oil prices are driving considerable speculation within the energy sector lately, and CHK stock is riding the wave. Specifically, crude futures have jumped nearly 20% in the past two weeks to trade near six-week highs on hopes of a production freeze out of OPEC. Additionally, Chesapeake Energy traders are also keying off the company’s newly secured $1 billion loan to repurchase bank notes due between 2017 and 2038.
Despite CHK’s roughly 7.4% leap yesterday, options traders appeared to favor puts over calls on the session. Specifically, volume came in at 373,000 contracts, with puts accounting for 57% of the day’s take.
One explanation for the simultaneous rise in puts and CHK stock is a married put strategy, whereby the trader purchases both CHK stock and a out-of-the-money put as insurance against a potential reversal. Support for this theory is supported by the rise in put OI at the just out-of-the-money $5.50 put strike in the August and September series.
Hain Celestial Group Inc (HAIN)
A newcomer to the most active options list, Hain Celestial saw record short-term options volume soar to a record high of 211,000 contracts on Monday after the company delayed its fourth-quarter earnings announcement due to an accounting issue. Hain said that it is reviewing certain distributor concessions to make sure they were reported correctly on the quarter, and also noted that it doesn’t expect to meet earnings expectations for the period.
Despite the negative news, HAIN calls still accounted for 72% of yesterday’s total volume. While it’s tempting to say that this activity is HAIN traders looking for a rebound, we could very well be witnessing the closure of losing positions or the buying of calls as hedges against new short positions on the stock.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.