The bloom is off the rose for the “Trump rally,” and Wall Street is finally taking the new administration at its word as U.S. stock futures are headed broadly lower this morning. A string of geopolitical issues from President Donald Trump has traders worried, including potential new sanctions on Iran, the threat of sending troops to Mexico and a heated exchange with the Australian prime minister.
As a result, futures on the Dow Jones Industrial Average are down 0.23%, S&P 500 futures are off 0.22% and Nasdaq-100 futures have fallen 0.23%.
On the options front, call activity rebounded amid a string of strong quarterly reports from the tech sector. Overall, about 16.5 million calls and 14.2 million puts crossed the tape yesterday. On the CBOE, however, put activity remained a potent driver, with the single-session equity put/call volume ratio arriving at 0.71 and the 10-day moving average hitting another three-month high of 0.69.
As for Wednesday’s volume leaders, Apple Inc. (NASDAQ:AAPL) call options chased yesterday’s post-earnings rally as the company offered up a much-needed win. Elsewhere, Facebook Inc (NASDAQ:FB) also drew heavy call volume ahead of last night’s quarterly report and Advanced Micro Devices, Inc. (NASDAQ:AMD) extended its blistering 12-month rally to more than 430% on the heels of another blowout quarter.
Apple Inc. (AAPL)
After posting three straight quarters of declining revenue and faltering earnings, Apple finally hit it big. For the holiday quarter, Apple said it earned $3.36 per share on revenue of $78.4 billion, easily besting expectations for $3.22 per share on revenue of $77.42 billion.
According to CEO Tim Cook, the results were “Apple’s highest quarterly revenue ever and broke multiple records along the way. We sold more iPhones than ever before and set all-time revenue records for iPhone, Services, Mac and Apple Watch.”
But while AAPL options traders attempted to chase the rally with calls, Wednesday’s post-earnings call volume (as a percentage of total volume) still came in light. Total volume reached a whopping 3.34 million contracts yesterday, with calls accounting for a below average 61% of the day’s take. Still, 3.34 million contracts is quite impressive, and adds up to quite a lot of call activity on AAPL stock.
On the other hand, some traders appear to be fading the rally already, as open interest at the 3 Feb $128 and $127 strikes surged to more than 10,000 contracts each. AAPL is trading slightly lower in premarket action this morning, and broad market headwinds could place these puts in the money by weeks end.
Facebook Inc (FB)
Facebook stepped into the earnings limelight after the close last night to post its seventh-straight earnings beat. The company said sales surged 53% to $8.83 billion, with earnings arriving at $1.41 per share. Wall Street was expecting earnings of $1.31 per share on revenue of $8.52 billion. Additionally, daily active users (DAUs) rose 18% to 1.23 billion, mobile DAUs were up 23% at 1.15 billion and mobile ad revenue came in at 84% of all advertising revenue.
FB stock options traders were quite bullish heading into the report, with calls accounting for 64% of the nearly 1.6 million contracts traded. FB is trading roughly 0.6% higher this morning, with the shares set to open in record high territory north of $135.
Currently, there are 12,700 calls open at the $135 strike in the 3 Feb series, with another 12,000 at $137 and 12,700 at the $140 strike. If buying pressure can overcome broad market headwinds, FB could make a run at $137, but $140 may be unreachable until the end of next week.
Advanced Micro Devices, Inc. (AMD)
AMD solidified its position in the semiconductor hot seat yesterday when the company blew past Wall Street’s fourth-quarter earnings expectations. For the quarter, AMD narrowed its loss to a penny per share on revenue of $1.11 billion, compared to expectations for a loss of two cents per share on $1.07 billion in sales.
What’s more, AMD said its Ryzen should hit shelves by March and that the much-anticipated graphics processor should boost revenue by 18%.
AMD options traders were all over call contracts yesterday, with these typically bullish best making up 66% of the 712,000 contracts traded — well above average for AMD. As of yesterday’s close, the stock is trading north of all but the most bullish of heavy call OI strikes in the Feb. series, with 1,400 contracts at $12.50 and 1,100 at $13.
However, there is a bit of profit taking going on this morning, with AMD pulling back by about 1.5% amid broad market selling pressure. Profit taking might not be a bad idea at the moment, as a consolidation period is warranted after yesterday’s 16% surge.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.