Optimism appears to be in the air on Wall Street, with U.S. stock futures pointed higher as the Federal Reserve begins its two-day meeting to discuss monetary policy.
The Fed will deliver its decision tomorrow afternoon, after the Bank of Japan delivers its own judgment on the Japanese economy. Until then, August building permits and housing starts are the only economic data on tap.
Against this backdrop, futures on the Dow Jones Industrial Average have added 0.31%, while S&P 500 futures up 0.36% and Nasdaq-100 futures rising 0.35%.
Monday’s options activity retreated sharply in the wake of Friday’s September-expiration driven flood. Overall, a below-average 14.1 million calls and 11.9 million puts changed hands on the session. Over on the CBOE, calls were in demand as the single-session equity put/call volume ratio dipped to 0.56, while the 10-day moving average ticked lower to 0.63.
Providing fuel for Monday’s options volume, analysts at Citi issued a bullish research note and boosted their price target on Facebook Inc (NASDAQ:FB). Meanwhile, Intel Corporation (NASDAQ:INTC) call activity remained elevated after the company boosted third-quarter guidance on Friday. Finally, GoPro Inc (NASDAQ:GPRO) was hit with a wave of call activity after the company unveiled the new Hero5 and the Karma drone cameras.
Facebook Inc (FB)
If you are worried about a slowdown in Facebook’s ad load growth or competition from Snapchat, Citi has your back. The brokerage firm reiterated its bullish stance on FB stock yesterday, and lifted its price target to $158 from $148, implying a 22% upside from current levels.
While Citi admitted that competition was a serious concern, it thinks Facebook’s ad load should grow significantly more than current expectations to hit the Street’s lofty earnings targets.
Options traders appeared to tentatively agree in Monday’s trading action. Volume came in at 328,000 contracts, and while calls accounted for 56% of the day’s take, the call percentage of daily volume was below average for FB stock. Facebook’s September/October put/call open interest ratio also shows a bit of trepidation, arriving at 0.88, which is higher than the ratio’s August range near 0.65. In other words, while call OI still outnumbers put OI among near-term options, puts are being added at a faster rate.
Intel Corporation (INTC)
On Friday, Intel shocked investors when it boosted its third-quarter guidance due to strong demand in the PC market. The semiconductor giant now expects revenue of $15.6 billion, up from its prior third-quarter forecast of $14.9 billion. What’s more, Intel lifted its gross profit margin guidance from 60% to 62% citing “higher PC unit volume.”
Call volume has risen sharply on INTC stock during the past two sessions. On Monday, INTC saw total volume of 219,000 contracts, with calls snapping up 68% of the day’s take — a figure well above average.
Short-term call speculators have heavily targeted the $38 strike, which sports over 3,600 contracts in the weekly September 23 series. However, put traders have also gotten in on the act, with some 6,900 contracts now open at the $37 strike in the series.
GoPro Inc (GPRO)
At its much-anticipated unveiling event on Monday, GoPro finally took the wraps off its new Hero5 and Karma drone product lines. The Hero5 is the first new camera model for GoPro in about two years and replaces the Hero4 as the company’s flagship model.
The Karma, meanwhile, is GoPro’s answer to critics of the company’s lean product line, and is also a move to address increased competition from camera drone makers, which have risen in popularity recently.
Options traders appeared enthused about GoPro’s new offerings, with volume rising to more than 209,000 contracts following the reveal. Calls won the day, accounting for 57% of GPRO’s total options volume.
Looking out to the monthly October options series reveals high expectations among some GPRO options traders, as peak call OI for the series totals nearly 13,000 contracts at the deep out-of-the-money $20 strike. Peak put OI for October, meanwhile, numbers roughly 9,700 contracts at the further-out-of-the-money $8 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
