It’s Federal Reserve day on Wall Street, and U.S. stock futures are trending cautiously higher ahead of the Federal Open Market Committee’s decision on interest rates, and Fed Chair Janet Yellen’s accompanying statement. With economists all but guaranteeing that the Fed will lift rates by 1 to 1.25 points later today, the focus of this afternoon’s announcement will be Yellen’s commentary on the economy and defense of the Fed’s rate-hike plan.
Against this backdrop, futures on the Dow Jones Industrial Average are up 0.12%, with Nasdaq-100 futures rising 0.16% and S&P 500 futures lagging with a gain of 0.06%.
On the options front, volume was pretty average Tuesday, with about 13.8 million calls and 12.2 million puts changing hands on the session. On the CBOE, the single-session equity put/call volume ratio dropped to 0.64, though the 10-day moving average once again held at 0.62.
Diving into Tuesday’s options activity, Apple Inc. (NASDAQ:AAPL) CEO Tim Cook confirmed the company plans for and involvement in the autonomous car market. Meanwhile, Tesla Inc (NASDAQ:TSLA) options volume rose following a pair of reports, including a five-star crash rating for the Model X and an investor call for the stock to hit $1,000. Finally, Micron Technology, Inc. (NASDAQ:MU) bounced back from the tech flash-crash on the heels of a bullish note from Macquarie Research.
Apple Inc. (AAPL)
During an interview with Bloomberg amid Apple’s WWDC, CEO Tim Cook confirmed the company’s secret car plans. “We’re focusing on autonomous systems,” Cook told Bloomberg, “It’s a core technology that we view as very important.” He went on to call the ambitious project “one of the most difficult AI projects to work on.”
With Apple down nearly 6% since Goldman Sachs called into question valuation on FANG stocks, and analysts beginning to show concern about the new iPhone, Apple stock and options traders embraced the news. AAPL stock gained nearly 1% yesterday, and options traders sent more than 1.1 million contracts across the tape.
Furthermore, calls managed to account for 60% of the day’s take, and while this is below average for AAPL, it is above the declining call activity of the past two sessions. Overall, AAPL’s July series is showing signs of optimism following a month of negativity with the June series. Currently, the July put/call open interest ratio arrives at 0.64.
Tesla Inc (TSLA)
TSLA stock saw a pair of bullish drivers yesterday, sending the stock back toward all-time-high territory. First, the National Highway Traffic Safety Administration gave Tesla’s Model X a five-star safety rating in category it measures, a first for an SUV. What’s more, NHTSA noted that the Model X has the “lowest probability of injury of any SUV it has ever tested.”
Meanwhile, billionaire investor Ron Baron said he believes that TSLA stock will top $1,000 per share by 2020. Baron said that Tesla’s Model X and ramped up production would propel the company to such a lofty perch.
Despite all the hype, TSLA options traders remain reserved on the stock’s prospects. On Tuesday, TSLA saw volume top 549,000 contracts, with calls only scraping together 54% of the day’s take. That said, bearish sentiment has fallen sharply heading into July expiration, with the put/call OI ratio coming in at 0.96, down sharply from June’s peak reading of 1.36 on May 31. If this is a sign that options traders are capitulating to TSLA’s uptrend, it could have short-term bullish implications for the shares.
Micron Technology, Inc. (MU)
While MU stock was caught up in the two-day tech flash crash, the shares have bounced back nearly as quickly as they fell. Providing an additional boost for MU stock yesterday, Macquarie Research reiterated its “outperform” rating and $35 price target on MU stock. What’s more, the brokerage lifted its full-year 2017 and 2018 earnings and revenue projections, citing recovering smartphone demand in China and increased DRAM demand.
Options traders have been quite bullish on MU stock for some time, but it hasn’t slowed the shares one bit. On Tuesday, volume rose to over 318,000 contracts with calls gobbling up roughly 79% of the day’s take.
As a result of the flood of call attention levied at MU stock, the July put/call OI ratio has plunged to a reading of 0.35, with calls nearly tripling puts among near-term options. That said, traders are showing some signs of restraint, as peak July call OI (totaling 51,000 contracts) lies at the in-the-money $30 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.