Despite a string of setbacks this week, the Dow Jones Industrial Average is still on track to post gains for the fifth straight week. Oil remains a concern, with futures contracts hitting their lowest prices since November, but tech and healthcare stocks have helped drive stocks higher — especially with the new Senate healthcare bill looking to repeal taxes on prescription drug makers and medical devices.
Heading into the open, futures on the Dow Jones Industrial Average are down 0.12%, S&P 500 futures have added 0.06% and Nasdaq-100 futures have dropped 0.03%.
On the options front, volume slipped a bit, with traders backing off puts as the market remained in positive territory for most of the session. Overall, about 15.7 million calls and 11.5 million puts changed hands on Thursday. On the CBOE, the single-session equity put/call volume ratio saw a influx of calls yesterday, diving to 0.50 — its lowest point since Dec. 8. The 10-day moving average, however, held at a two-month high of 0.66.
Turning to Thursday’s options activity, Advanced Micro Devices, Inc. (NASDAQ:AMD) call options roll on as Epyc launches to much fanfare. Meanwhile Valeant Pharmaceuticals Intl Ltd (NYSE:VRX) jumped on a potential executive order on drug pricing and the new Senate healthcare bill. Finally, BlackBerry Ltd (NASDAQ:BBRY) was flooded with call options ahead of today’s earnings report.
Advanced Micro Devices, Inc. (AMD)
The hits keep coming for Advanced Micro Devices. The company launched its new Epyc data center processor to considerable fanfare on Thursday. The new CPU, which is both cheaper than and outperforms Intel Corporation (NASDAQ:INTC) offerings, drew quite a bit of analyst attention — most notably Canaccord Genuity raised its price target to $20 from $17 and said that Epyc could create $1 billion in revenue for AMD by 2020.
Options traders flooded AMD with calls following the bullish report, as these typically bullish best accounted for 70% of the more than 833,000 contracts traded. What’s more, AMD saw considerable action at its July $14 and $15 strikes, with 2,300 trading on open interest of about 61,000 contracts at the $14 call strike and 1,600 contracts crossing on the $15 call strike, which sports OI of roughly 53,,00 contracts.
While the activity at the $14 strike could well be profit taking, the jump in volume at the $15 strike appears to be outright bullish in nature. With sentiment once again swinging in AMD’s favor, the shares could be on course to challenge $16 in short order — especially with Intel essentially on the sidelines at this point.
Valeant Pharmaceuticals Intl Ltd (VRX)
Valeant has come under heavy fire this year for what many believe to be exorbitant drug prices. During his presidential campaign, Donald Trump repeatedly took aim at high drug prices, and his administration had suggested it would put restrictions on drug makers.
Fast forward to yesterday, and rumors are now spreading that Trump could sign an executive order that would implement many issues the drug industry has lobbied for. What’s more, the Senate’s new healthcare bill — designed to replace the Affordable Care Act — also contains provisions that are also friendly to drug makers.
The combination sent VRX stock soaring more than 13%, and options traders loaded up on calls as a result. In fact, calls made up 68% of the more than 645,000 contracts traded on VRX on Thursday. That said, VRX’s July put/call OI ratio remains stubbornly high, coming in at 0.79 — which is actually up from a reading near 0.73 last week. In other words, it appears that VRX options traders decided to take profits on Thursday’s rally, and with no concrete evidence that either the executive order or the Senate’s bill will come to pass, look for more profit taking going forward.
BlackBerry Ltd (BBRY)
BlackBerry slipped into the earnings confessional bright and early this morning, and while the numbers disappointed some investors, BBRY options traders appeared to be rather bullish ahead of the event. Volume topped 277,000 contracts for BBRY, with calls snapping up 79% of the day’s take.
Furthermore, BBRY’s 23 June put/call OI ratio has plunged to a reading of 0.47, with calls more than doubling puts among options most affected by today’s earnings report.
BlackBerry earned 2 cents per share on GAAP revenue of $235 million. BBRY stock is down over 8% in premarket trading.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.