Friday’s Vital Data: Apple Inc. (AAPL), General Electric Company (GE) and United Continental Holdings Inc (UAL)

Options activity provides a look at expectations on AAPL, GE and UAL

By Joseph Hargett, InvestorPlace Contributor

U.S. stock futures are trading broadly higher this morning, as Wall Street gained confidence in the potential for tax reform. Senate Republicans narrowly passed a budget blueprint for the next fiscal year, which Wall Street believes will pave the way for the Donald Trump tax reform package.

Friday’s Vital Data: Apple Inc. (AAPL), General Electric Company (GE) and United Continental Holdings Inc (UAL)

Regardless of what you think about the Trump tax plan, investors appear happy with this development. Specifically, futures on the Dow Jones Industrial Average are up 0.38%, S&P 500 futures have added 0.26% and Nasdaq-100 futures have gained 0.23%.

On the options front, volume hit near-term highs on Thursday, with about 19.9 million calls and 16.6 million puts changing hands on the session. On the CBOE, the single-session equity put/call volume ratio slipped to 0.70, while the 10-day moving average held at a two-month high of 0.67.

As you can see from the chart below, Thursday’s options activity remained elevated across the board. Apple Inc. (NASDAQ:AAPL) got off light, with volume hitting 171% of its daily average following news that the Apple Watch lost cell service in China. Meanwhile, General Electric Company (NYSE:GE) saw volume soar to nearly five times the norm ahead of this morning’s disappointing quarterly report. Finally, United Continental Holdings Inc (NYSE:UAL) sparked a firestorm of activity after the company held a disastrous post-earnings conference call.

Friday’s Vital Options Data: Apple Inc (AAPL), General Electric Company (GE) and United Continental Holdings Inc (UAL)

Apple Inc. (AAPL)

AAPL stock was hit with a double whammy yesterday. Not only did the shares lose ground amid a broad selloff in technology stocks, but the Apple also took a hit from news out of China.

It seems the Apple Watch’s cellular service was abruptly cut off in China, with no explanation. The news is not good for Apple, which continues to struggle with lower-cost options in China — a key consumer market for the company.

Options traders, however, appeared to look beyond China and possibly toward next month’s earnings report. Volume rose to over 730,000 contracts, with calls making up an above average 63% of the day’s activity. That said, there is still some lingering pessimism heading into Apple’s report.

Specifically, the weekly Nov 3 put/call open interest ratio has risen to a near-term high of 0.73. A rising put/call OI ratio indicates that puts are being added at a faster rate than calls, potentially signaling a shift in sentiment as Apple’s earnings draw near.

General Electric Company (GE)

GE traders were gung-ho heading into this morning’s quarterly report. The stock had just come off a 2% rally heading into the event, and options traders were gearing up. It was all for naught, however, as GE posted its first quarterly loss in 2.5 years this morning.

Earnings fell to 29 cents per share, whiffing the Street’s target of 49 cents. While revenue rose 14% to $33.47 billion and beat expectations for $32.51 billion, the over-the-top costs of restructuring caught investors off guard.

Options traders appeared to have anticipated at least some bad news just ahead of the event. Volume yesterday rose to 700,000 contracts, with puts eating up 59% of the day’s take. With GE set to open down over 8%, there are about 50,000 contracts at each of the Oct $23 and $22.50 strikes that are set to finish in the money today.

United Continental Holdings Inc (UAL)

Where there were only musing that United needed some fresh leadership heading into yesterday’s post-earnings conference call, there are now screams. In the span of just one hour, United Chief Executive Officer Oscar Munoz and President Scott Kirby scuttled UAL stock. The duo failed to adequately answer questions regarding the company’s struggle with low-cost airlines, and when analysts pushed for more details, the pair became irate and testy. Munoz reported asked for “a little bit more patience.”

Options traders appeared to either take profits or bet on a rebound, however. Volume on UAL jumped to 173,000 contracts, with calls snapping up 69% of the day’s take — an unusually high amount of calls for a stock that plunged more than 12%. UAL is now trading well below all major put and call strikes in the November series, save the $57.50 put, where about 6,000 contracts currently reside.

If you’re betting on UAL holding its ground here, this strike might make a good target for a put sell position.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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