U.S. stock futures are on the rise again this morning, as Wall Street is once again on Dow 20K watch. The Dow Jones Industrial Average crept back above the 10,900 mark yesterday, and if investors like what they see in today’s release of last month’s Federal Open Market Committee (FOMC) minutes, we could see the Dow challenge 20,000. What’s more, December auto sales will also begin to leak onto the Street today.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.18%, S&P 500 futures have gained 0.19% and Nasdaq-100 futures have added 0.15%.
On the options front, volume finally returned to normal levels on Tuesday, with roughly 15.9 million calls and 11.2 million puts changing hands. The heavy skew toward call activity bled over into the CBOE, where the single-session equity put/call volume ratio hit retreated from one-week high to rest at 0.69. The 10-day moving average held at a one-month high of 0.67.
Turning to Tuesday’s volume leaders, JPMorgan Chase & Co (NYSE:JPM) saw record short-term options volume on Tuesday ahead of today’s ex-dividend date and next Friday’s earnings report. Elsewhere, put activity ramped up on Verizon Communications Inc. (NYSE:VZ) despite Citigroup’s upgrade to “buy,” while Ford Motor Company (NYSE:F) received a bullish lift in sentiment after it cancelled its plans for a $1.6 billion plant in Mexico.
JPMorgan Chase & Co. (JPM)
JPM stock trades ex-dividend today, with shareholders of record as of the close last night receiving a payout of 48 cents per share on Jan. 31. As with all ex-dividend dates, JPM stock was flooded with deep-in-the-money call activity as traders implemented dividend capture strategies.
That said, some of yesterday’s VZ options volume may have been geared toward next week’s quarterly earnings report. Verizon is expected to post a profit of $1.42 per share on Friday next week, with revenue seen coming in at $23.87 billion.
EarningsWhispers.com places the whisper number at $1.47 per share, though given President-elect Donald Trump’s promise of decreased regulation and the Federal Reserve’s threat of three interest rate hikes in 2017, guidance may well be the real driver for JPM stock next week. Still, don’t expect to see options volume similar to yesterday’s activity, where roughly 2.1 million contracts traded with calls snapping up 95% of the day’s take.
Verizon Communications Inc. (VZ)
VZ stock jumped 2.25% on Tuesday, driven higher by a broad market rally and an upgrade to “buy” at Citigroup. Analysts at the brokerage firm bumped their price target to $60 and cited a strong M&A outlook and an upbeat outlook for 5G wireless services. Lighter regulations from the incoming Trump administration could also be a potential driver for VZ stock, Citigroup noted.
Despite the bullish recommendation, VZ options traders piled into puts on Tuesday. Total volume rose to over 308,000 contracts, with puts accounting for 65% of the day’s take. That said, VZ stock saw more than double its daily trading volume, hinting that options activity may have been driven by married put activity, where a stock trader buys an at-the-money or out-of-the-money put as an insurance policy against a decline in a fresh long stock position — such as the block of 12,500 VZ April $52.50 puts that traded at an ask of $1.65 yesterday, according to Trade-Alert.com.
Ford Motor Company (F)
Ford made headlines across the board on Tuesday when it cancelled its plans to build a $1.6 billion manufacturing plant in Mexico, and opted instead to spend $4.6 billion on electric and autonomous vehicles. Ford CEO Mark Fields also announced that the company’s Flat Rock Assembly Plant would get an additional $700 million and add 700 workers.
While many are attributing the decision to pressure from Trump, simple economics may have been the real driver behind the move, with Fields noting that Ford had not done a deal with Trump, and instead had conducted an annual review and decided that “it was very clear we didn’t need the capacity, and we made the decision.”
Regardless of the reasons, F options traders were ecstatic, with calls accounting for 72% of the more than 192,000 contracts traded on Ford stock yesterday.
Tuesday’s activity continues a trend for F options, as the total January 2017 put/call open interest ratio (which included weekly options) has fallen to a perch at 0.61, with calls nearly doubling puts among all options set to expire this month.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
