U.S. stock futures are looking to bounce back this morning after President-elect Donald Trump’s comments on the dollar scuttled Wall Street’s rally on Tuesday. Trump opined that a strong dollar was harming the U.S. economy, and he blamed China’s currency manipulation as one of the main drivers. This morning, traders are looking toward earnings from Goldman Sachs Group Inc (NYSE:GS) and a speech from Federal Reserve Chair Janet Yellen for guidance.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.05%, S&P 500 futures have edged 0.03% higher, while Nasdaq-100 futures are up 0.10%.
On the options front, volume remained strong as we near Jan. 2017 options expiration on Friday. On the day, some 15.5 million calls and 12.8 million puts changed hands, lending activity a bullish bias. Over on the CBOE, the single-session equity put/call volume ratio remained volatile, rising to 0.65, while the 10-day moving average ticked lower to 0.66.
Turning to Tuesday’s volume leaders, the earnings buzz is growing around Apple Inc. (NASDAQ:AAPL), but the company made headlines yesterday after announcing it would hike prices on the U.K. App Store. Elsewhere, Ford Motor Company (NYSE:F) trades ex-dividend today, but the company also grabbed headlines for its new 2018 Mustang and for slipping EU sales. Finally, Netflix, Inc. (NASDAQ:NFLX) reports earnings after the close today, but all traders can talk about is acquisition speculation from Apple or Walt Disney Co (NYSE:DIS).
Apple Inc. (AAPL)
AAPL stock caught many investors’ eyes yesterday, as the stock crept toward key resistance at $120. Helping to push the shares higher was a report that Apple was hiking the prices on the U.K. App Store, as much as 25% in some cases, in response to a weakening pound. The pound has fallen roughly 18% since June.
Additionally, earnings speculation is ramping up on Apple, as traders prepare for the Jan. 31 quarterly report. Expectations are currently set for a profit of $3.22 per share on revenue of $76.82 billion. The whisper number rests at $3.23 per share, according to EarningsWhipsers.com.
With $120 in sight, and earnings just over the horizon, AAPL call options have seen demand rise sharply. On Tuesday, volume reached 772,000 contracts, with calls accounting for an above average 67% of the day’s take.
Looking out to 3 Feb options, those most affected by Apple’s quarterly report, we find peak call open interest totals about 8,600 contracts at the at-the-money $120 strike, though interest and expectations are growing at the $125 strike, where 4,100 contracts reside. Peak put OI for the series, meanwhile, numbers only about 5,400 contracts at the $116 strike.
Ford Motor Company (F)
F stock trades ex-dividend today, with shareholders of record as of the close last night eligible for a payout of 15 cents per share on March 1. With Ford seeing unusually high volume of 653,000 contracts yesterday, and calls accounting for 90% of that volume, most of Tuesday’s options activity was likely focused on dividend capture strategies.
It will be interesting to see how options speculators handle F stock the rest of the week after dividend capture trades are played out.
Netflix, Inc. (NFLX)
Netflix will slip into the earnings confessional after the close this evening to release its fourth-quarter earnings report, and yet, all traders want to talk about is speculation on whether Disney or Apple will made a bid for the streaming giant. Netflix is expected to post a profit of 13 cents per share on revenue of $2.46 billion, with whisper numbers coming in at 16 cents per share. Subscriber growth is expected to top 5.1 million worldwide on the quarter.
Options activity was unexpectedly light on NFLX stock yesterday, considering today’s quarterly report. Only about 244,000 contracts changed hands on Netflix, with calls and puts split nearly down the middle. As for earnings expectations, peak Jan 2017 call open interest totals 22,500 contracts at the in-the-money $130 strike, while peak put OI for the series numbers 15,300 contracts at the same strike.
Clearly, options traders are not expecting NFLX to trade much higher in response to tonight’s report.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.