You better get used to hearing about the Federal Reserve and oil. U.S. stock futures are set for a bit of a bounce this morning, as stocks look to recover some of yesterday’s Fed confusion and oil driven losses.
Crude prices are on the mend overseas, with oil down 25 cents at $44.65 at last check. Meanwhile, insight into the Fed’s monetary plans remains muddled heading into next week’s Federal Reserve policy meeting.
Against this backdrop, futures on the Dow Jones Industrial Average are up 0.16%, with S&P 500 futures adding 0.22% and Nasdaq-100 rising 0.33%.
Tuesday’s options activity came in well above average, as put volume spiked amid the broad-market selloff. Overall, 15.8 million calls and 18.5 million puts changed hands on the session. Over on the CBOE, the single-session equity put/call volume ratio also indicated a rise in put volume, coming in at 0.75 and driving the 10-day moving average to a one-week high of 0.65.
Driving Wednesday’s options volume, Apple Inc. (NASDAQ:AAPL) call activity ramped up after Sprint Corp (NYSE:S) and T-Mobile US Inc (NYSE:TMUS) reported strong iPhone 7 pre-orders. Elsewhere, Alcoa Inc (NYSE:AA) saw unusually heavy back-month call option speculation, while a noted Tesla Motors Inc (NASDAQ:TSLA) short seller spoke out on the company’s SolarCity Corp (NASDAQ:SCTY) merger.
Apple Inc. (AAPL)
Investor concerns regarding Apple iPhone 7 sales were assuaged on Tuesday, after Sprint and T-Mobile reported strong pre-orders for Apple’s newest flagship smartphone. In fact, the carrier duo said that iPhone 7 pre-orders were coming in at four times that of the iPhone 6 ahead of its launch.
Sprint and T-Mobile combined for 30% market share in U.S. subscribers during June.
Call volume had been trailing off for AAPL stock in recent weeks, but Tuesday marked a comeback for these typically bullish bets. Some 1.5 million contracts crossed the tape on AAPL on Tuesday, with calls snatching up 65% of the day’s take — compared to an average of just below 60% for the prior three weeks.
AAPL stock rose 2.5% on the news yesterday, but the shares stopped short of $110. This level is key for Apple stock going forward, as it is not only home to growing technical resistance, but also heavy call and put OI in the September/October series. In September alone, some 87,000 calls and 24,000 puts reside at the $110 strike, with only the September $115 strike (OI: 106,000 contracts) outstripping the $110 accumulations.
Alcoa Inc (AA)
AA stock followed the market lower yesterday, with the shares once again pulling back to support near their 200-day moving average. Alcoa’s recent retreat into single-digit territory initially sparked a round of bargain hunting, but the stock was unable to resist broad market headwinds and faltering aluminum prices.
Still, AA options traders appear to be betting heavily on a rebound for the shares. Total volume on Tuesday spiked to nearly half a million contracts, with 96% of yesterday’s activity crossing on the call side. Digging deeper into the activity via Trade-Alert.com reveals that much of Wednesday’s volume was tied up in an interesting $2.8 million calendar spread.
Specifically, two blocks of 50,000 October $11 calls traded simultaneously at about noon for the bid price of 9 cents, or $9 per contract. At the same time, two blocks of 50,000 January 2017 $11 calls traded for the ask price of 37 cents, or $37 per contract. The outlay for this calendar spread was 28 cents, or $28 per contract, or a full total of $2.8 million.
Tesla Motors Inc (TSLA)
Tesla Motors is no stranger to short sellers. As of the most recent reporting period, some 26 million TSLA shares were sold short, accounting for more than 22% of the stock’s total float. However, most of these short sellers are not all that outspoken.
Jim Chanos broke that silence yesterday at the CNBC Institutional Investor Delivering Alpha Conference in New York. According to Chanos, a combined Tesla/SolarCity will be a “walking insolvency,” adding that “The synergies are questionable at best.”
The statement added fuel to the fire for already worried TSLA stockholders, and the shares dropped more than 1% on Tuesday, bringing the stock’s decline to more than 16% since late July. Options were also wary, with puts accounting for 51% of the 221,000 contracts traded on TSLA on Tuesday.
Among near-term September options, the $200 strike is the most popular, sporting OI of 11,200 contracts, while the $205 call strike is tops on the flip side of the coin, with 11,500 contracts in residence.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
