U.S. stock futures are edging higher heading into the open, as Wall Street prepares for another heavy round of corporate earnings. Topping today’s list are Walt Disney Co (NYSE:DIS) and Nvidia Corporation (NASDAQ:NVDA). Meanwhile, a trio of Fed speakers will be scrutinized for any indications as to the direction of interest rates at the June Federal Open Market Committee meeting. Currently, fed funds futures are pricing in an 87.7% chance of a 1.0 to 1.25 basis point hike at the June meeting.
At last check, futures on the Dow Jones Industrial Average were up 0.13%, while S&P 500 futures had added 0.08% and Nasdaq-100 futures were higher by 0.07%.
On the options front, volume was anemic on Monday, as fears over the French election subsided. On the day, roughly 14.4 million calls and 11.3 million puts changed hands. Turning to the CBOE, the single-session equity put/call volume ratio retreated for a third consecutive session, arriving at 0.6. The 10-day moving average held at 0.66.
Driving Monday’s options activity, Apple Inc. (NASDAQ:AAPL) was flooded with call volume after Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) disclosed it has tripled its AAPL holdings since December, amid other positive headlines. Elsewhere, JD.com Inc (ADR) (NASDAQ:JD) was also call heavy after reporting better-than-expected first-quarter earnings. Finally social media upstart Snap Inc (NASDAQ:SNAP) was inundated with puts ahead of tomorrow’s trip to the earnings confessional.
Apple Inc. (AAPL)
Driven by Warren Buffett and iPhone 8 news, AAPL stock rose nearly 3% on Monday to hit a new record high, and $800 billion in market cap. Buffett now holds a nearly $19.2 billion stake in Apple via Berkshire Hathaway — triple his holdings in December.
Additionally, reports in the Digitimes and Economic Daily News indicate that the iPhone 8 is on schedule, and will be unveiled in September and go on sale in October. Lastly, Drexel Hamilton’s Brian White put a $202 price target on the stock, implying that the company will be worth more than $1 trillion within a year.
The pair of reports helped push AAPL stock options volume to a near-term high of more than 2.6 million contracts on Monday. What’s more, calls gobbled up a hefty 72% of yesterday’s total volume. Looking out to the June series, however, we find that sentiment among options traders is still far from excessive levels. In fact, the June put/call open interest ratio currently rests at 0.94, with calls and puts in near parity.
Peak call OI currently numbers 69,300 contracts at the just overhead June $155 strike, while peak put OI for the series totals 28,800 contracts at the $145 strike- underscoring caution among short-term AAPL stock traders.
JD.com Inc(ADR) (JD)
The Chinese e-commerce market is red-hot right now, and JD.com is capitalizing on the market’s considerable growth. China’s No. 2 e-commerce retailer said it swung to a profit in the first quarter, with net income rising to $122.5 million, or 2 cents per share, compared to a $126 million loss last year.
Revenue soared 41.2% to $111.1 billion. Partnerships with a U.K. retailer and Wal-Mart Stores Inc (NYSE:WMT) helped drive results, as JD.com moves to bring British American products to Chinese consumers. Walmart currently holds a 12.1%, or roughly $4.87 billion, stake in JD.com.
With JD stock soaring nearly 8% on Monday, options traders were quick to chase the trend. More than 301,000 contracts traded on JD stock yesterday, with calls snapping up 75% of the day’s take. Optimism on JD stock is far from peak levels, however, with the June put/call OI ratio coming in at 0.88.
In other words, there is additional room for a follow through rally in the wake of yesterday’s quarterly report as more bulls come on board.
Snap Inc. (SNAP)
Snap is facing a wall of worry as it heads into the earnings confessional tomorrow afternoon. Wall Street is expecting the Snapchat operator to post a loss of 19 cents per share in the company’s debut as a publicly traded company, though estimates range as low as a loss of 17 cents per share and as high as a loss of 61 cents per share. Analysts are mostly bearish on SNAP, with Zacks reporting that 15 of the 24 brokerage firms covering the shares have issued “hold” or worse ratings.
Options traders appear to be following suite. On Monday, SNAP saw more than 189,000 contracts change hands, with puts accounting for 64% of the day’s take. That said, the 12 May put/call OI ratio has fallen in recent sessions to just 0.50, with calls doubling puts among those options most affected by tomorrow’s earnings.
Implieds for the 12 May series are currently pricing in a potential post earnings move of about 13.6%, with the upper bound resting at $25.56 and the lower bound near $19.44.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.