U.S. stock futures are trading broadly lower this morning, as the tech-sector rout picks up where it left off on Friday. Sparked by a research note at Goldman Sachs warning that the so called “FANG” stocks may be overbought, tech heavyweights like Apple Inc. (NASDAQ:AAPL), Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN) all headed sharply lower Friday, and are extending those losses this morning.
As a result, futures on the Nasdaq-100 are down 0.77%, more than tripling losses in S&P 500 futures, which are off 0.16%, and Dow Jones Industrial Average futures, which have shed 0.13%.
On the options front, June expiration brought a deluge of activity as tech traders attempted to pull profits off the table amid a sharp sell-off on the last day of the contract. In fact, volume surged to 24.9 million calls and 23.5 million puts on Friday. On the CBOE, a preference for puts sent the single-session equity put/call volume ratio soaring to 0.72 from Thursday’s perch at 0.55. What’s more, the 10-day moving average bounced off its lowest level since February to close out the week at 0.62.
Diving into Friday’s options activity, Apple options were mixed after reports of slow iPhone modems, and could remain mixed following this morning’s downgrade at Mizuho Securities. Nvidia Corporation (NASDAQ:NVDA) saw an uptick in put volume after noted short-seller Citron Research once again issued a bearish research note on the stock. Finally, Amazon.com stock gave up the $1,000 mark in the wake of Goldman Sachs’ tech sector warning.
Nvidia Corporation (NVDA)
Citron Research is at it again on NVDA stock, issuing a report that called Nvidia a “casino stock” and arguing that the shares had rallied too far. Citron also called Citi’s recent research note on NVDA stock “irresponsibly bullish.” Add this to Goldman Sachs tech concerns, and Nvidia ended Friday with a loss of nearly 6.5%.
NVDA options traders also shied away from the shares, with calls only making up 54% of the more than 1.8 million contracts traded. If you read Friday’s report, you know that NVDA call traders were already in the process of liquidating their June positions heading into expiration — a smart move given the stock’s plunge on Friday.
Looking out to July, however, indicates that some NVDA options traders may have rolled their call positions out to back months. Currently, the July put/call open interest ratio arrives at 0.60, down sharply from the final June reading of 1.52. With NVDA stock up more than 30% since the last time Citron issued a bearish note, these calls may be smart money going forward.
Amazon.com, Inc. (AMZN)
Even the high and mighty AMZN stock was not immune to Friday’s tech selloff. The shares dropped more than 3% on Friday and are off another 1% this morning. In addition to the Goldman note, Bank of America Merrill Lynch raised additional hackles by warning that large-cap funds had increased their exposure to tech by levels exceeding even the dot-com bubble era. It was enough to push AMZN stock back below $1,000.
AMZN options traders responded with a preference toward puts on the day. Total volume rose to over 595,000 contracts, with puts eking out 51% of the day’s take. That said, puts have not been as heavy in the July series as they were in June, with the current front-month put/call OI ratio arriving at just 1.17 for AMZN. Currently, peak July put OI totals over 3,300 contracts and rests at the out-of-the-money $800 strike. Meanwhile, roughly 2,700 puts are open at the now-in-the-money $1,000 strike.
Apple Inc. (AAPL)
Caught in the midst of the Goldman Sachs tech sector warning, AAPL stock’s losses accelerated to nearly 4% on Friday after a Bloomberg News report on iPhone modem speeds. According to Bloomberg News, the Intel Corporation (NASDAQ:INTC) modem chips that the new iPhone will use are notably slower than the Qualcomm, Inc. (NASDAQ:QCOM) chips utilized by most of its competitors, raising fresh concerns about Apple’s flagship mobile device.
What’s more, AAPL stock is down another 2% this morning after receiving its second downgrade of the year. Essentially saying that AAPL stock is fully valued at current levels, Mizuho Securities downgraded Apple to “neutral” from “buy” and lowered its price target to $150 from $160.
Despite June expiration providing an added boost to volume, AAPL’s call volume as a percentage of daily volume fell sharply from recent levels. Total volume ramped up to more than 2.3 million contracts on Friday, with calls scraping together 60% of the day’s take. This may seem like a considerable amount, but given that typical call percentages were in the 63%-64% range for the past month, it seems AAPL call traders are losing their appetite, which could have additional bearish implications for the stock.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.