U.S. stock futures are in rally mode this morning, as Wall Street appears to have digested last week’s flood of economic data and the Fed’s interest rate hike … and decided all was well. Speaking of the Fed, both the New York Fed President William Dudley and Chicago Fed President Charles Evans are slated to speak later today.
Heading into the open, futures on the Dow Jones Industrial Average have jumped 0.33%, with S&P 500 futures rallying 0.30% and Nasdaq-100 futures soaring 0.68%.
On the options front, volume remained brisk through June expiration on Friday, with about 18.5 million calls and 17.9 million puts changing hands on the day. Over on the CBOE, the single-session equity put/call volume ratio plummeted from it’s six-month high on Thursday at 0.80 to just 0.67 on Friday. The 10-day moving average ticked higher to 0.64 — hitting a one-month high as a result.
Diving into Friday’s options activity, Amazon.com, Inc. (NASDAQ:AMZN) saw a surge in options volume after announcing it was buying Whole Foods Market, Inc. (NASDAQ:WFM) for $13.7 billion. Wal-Mart Stores Inc (NYSE:WMT) announced it’s own acquisition, snapping up menswear company Bonobos, but the Amazon deal largely dictated options activity. Finally, Nvidia Corporation (NASDAQ:NVDA) continued to see mixed activity even as the shares reclaim key technical support levels.
Nvidia Corporation (NVDA)
NVDA stock has surged more than 45% since the beginning of May. This breakneck pace was part of the reason the shares plunged in last week’s tech sector flash crash — as may analysts are beginning to express valuation concerns.
It was enough to prompt Tom Taulli to ask, “Has Nvidia stock sold off too far?”
Despite the lingering concerns, the tech sector bounced back quickly from the heavy selling pressure, with stock traders and call options traders piling back into Nvidia. Maybe a bit too soon.
Volume on Friday was impressive, with 377,000 contracts changing hands on NVDA stock — 59% of those contracts trading as calls. However, put adds have still outweighed calls in the past week, with the July put/call OI ratio rising from 0.60 on July 12 to today’s perch at 0.89. Skepticism at this point would be welcome for Nvidia, as the shares likely need to blow off a bit more steam before seriously heading higher.
Amazon.com, Inc. (AMZN)
Friday’s blockbuster story was Amazon’s $13.7 billion acquisition of Whole Foods. Amazon has all but dominated the retail space for years, but groceries have been a major hurdle for the company — one it hopes the Whole Foods acquisition will solve. For Whole Foods, the price tag represents a 27% premium to Thursday’s close. WFM stock rose more than 29% following the news, while AMZN added roughly 2.5%.
“This partnership presents an opportunity to maximize value for Whole Foods Market’s shareholders, while at the same time extending our mission and bringing the highest quality, experience, convenience and innovation to our customers,” Whole Foods CEO John Mackey said in a release.
Options activity was understandably brisk for both Amazon and Whole Foods on Friday.
But, while WFM saw a flood of call volume anticipating the buyout (82% of the 625,000 Whole Foods contracts were call options), AMZN saw mixed activity as some options speculators appeared to remain cautious. Total volume for Amazon rose to a near-term high of 688,000 contracts, with calls only managing 59% of the day’s take.
That said, 59% still represents a considerable degree of call activity for AMZN stock, as traders generally trend toward put and premium selling due to lofty options prices.
Currently, peak July call OI totals 5,202 contracts at the overhead $1,000 strike.
Wal-Mart Stores Inc (WMT)
Amazon’s Whole Foods acquisition sent shock waves through the grocery market, but few were as impacted as Walmart.
The world’s largest brick-and-mortar retailer gains most of its edge on Amazon due to grocery operations, and the $13.7 billion WFM deal sent WMT stock skittering nearly 5% lower. It even overshadowed Wal-Mart’s own $310 million deal for online menswear retailing specialist Bonobos.
The Bonobos acquisition is yet another step in Walmart’s move to compete online with Amazon. WMT has also snapped up online fashion firms Moosejaw and ShoeBuy, as well as e-commerce site Jet.com.
Walmart also saw a fair amount of call options activity on Friday. Total volume hit a near-term high of 491,000 contracts, with calls snapping up 59% of the day’s take. That said, Friday’s nearly 5% plunge has placed WMT shares well below peak July call OI of 28,000 contracts at the $80 strike.
It could now take the shares considerably longer to overcome that round-number technical hurdle.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.