U.S. stock futures are in rally mode this morning, after General Motors Company (NYSE:GM) bolstered premarket sentiment with its fourth-quarter earnings beat. Additionally, stocks are being bolstered by a rising U.S. dollar, which is up nearly 1% after Philadelphia Federal Reserve President Patrick Harker said late yesterday that a March interest rate hike was “on the table.”
At last check, futures on the Dow Jones Industrial Average had advanced 0.23%, while S&P 500 futures were up 0.29% and Nasdaq-100 futures were higher by 0.21%.
On the options front, volume plummeted on Monday following Friday’s brisk session. On the day, only about 11.4 million calls and 11.8 million puts changed hands — coming in well below average. Over on the CBOE, the single-session equity put/call volume ratio leapt to 0.75, though the 10-day moving average held at 0.69 for the fourth straight session.
Turning to Monday’s volume leaders, Advanced Micro Devices, Inc. (NASDAQ:AMD) surged more than 11% after rumors hit the Street that the company was collaborating with chief rival Intel Corporation (NASDAQ:INTC). Elsewhere, Twitter Inc (NYSE:TWTR) call traders continued to ramp up their positions heading into Thursday’s quarterly earnings report, and Netflix, Inc. (NASDAQ:NFLX) short sellers appear to be hedging their positions.
Advanced Micro Devices, Inc. (AMD)
AMD stock is on fire and call options traders were chomping at the bit to get in on the run on Monday.
Driving AMD’s latest rally was news that Intel was licensing AMD GPU technology. According to Kyle Bennet, editor in chief at HardOCP:
“Intel is licensing AMD GPU technology. No money has changed hands yet, so there is no financial impact till late in the year, hence nothing in the current earnings report. The first product AMD is working on for Intel is a Kaby Lake processor variant … It is scheduled to come to market before the end of the year. I would expect more collaboration between AMD and Intel in the future on the graphics side.”
If true, the Intel collaboration would be huge for AMD, potentially giving the company a leg up on its main GPU competitor, Nvidia Corporation (NASDAQ:NVDA). AMD options traders apparently came to the same conclusion, as more than 670,000 contracts traded on the stock yesterday, with calls accounting for 64% of the day’s take.
Some of the more aggressive speculators have taken out considerable overhead call positions in the soon-to-expire 10 Feb series, where some 4,700 contacts are open at the $14 strike, with another 2,000-plus at $14.50.
Twitter Inc (TWTR)
Call speculation continues to ramp up on Twitter heading into Thursday’s quarterly report. Analysts are expecting a profit of 12 cents per share from Twitter, but EarningsWhispers.com places expectations about four cents higher at 16 cents per share. Given yesterday’s activity in the options pits, speculative traders are banking on the latter figure.
On Monday, TWTR stock saw more than 191,000 contracts change hands, with calls snapping up 62% of the day’s take. The most popular 10 Feb strike is the $18 call, where more than 10,000 contracts currently reside. If TWTR’s 1.3% premarket gain carries over into the open, these 10 Feb $18 calls will be firmly in the money.
Additionally, the $18.50 and $19 strikes have also gained considerable attention, attracting OI of 8,600 and 5,500 contracts, respectively. If this bullish bid turns out to be more than just hype, TWTR could be eyeing $20 before all is said and done.
Netflix, Inc. (NFLX)
Netflix announced yesterday that I’ll have to wait another eight months to watch season two of “Stranger Things.” While that’s certainly a bit depressing, NFLX short sellers took that negativity to another level in January. The number of NFLX shares sold short jumped by 5% to 25.2 million shares in the most recent reporting period — or roughly 6% of the stock’s total float.
Granted, short sellers are probably reacting more to NFLX’s recent all-time highs and not the wait for “Stranger Things.”
Still, it would seem that many shorts are not taking any chances on NFLX going upside down, as call volume has picked up notably in the wake of the spike in short interest. On Monday, volume jumped to 172,000 contracts, with calls making up 58% of the day’s take — arriving above average for NFLX.
Further evidence that shorts are hedging their bets is the sharp rise in at-the-money NFLX call OI. For instance, more than 7,700 calls are open at the Feb $140 strike, with another 13,200 open at the March $140 strike. In fact, out-of-the-money OI is scarce at this point, with only the March $145 strike (12,700 contracts) holding any meaningful call accumulation.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.