U.S. stock futures are trading flat to higher this morning, with Wall Street drifting bullish ahead of a flurry of Federal Reserve speeches and tomorrow’s September jobs data. What’s more, traders will also be keeping a close eye on the release of minutes from the latest European Central Bank policy meeting.
Against this backdrop, futures on the Dow Jones Industrial Average are up 0.04%, S&P 500 futures have added 0.07% and Nasdaq-100 futures are higher by 0.34%.
In the options pits, volume remained relatively lackluster on Wednesday, with about 14.1 million calls and 11.3 million puts changing hands. On the CBOE, the single-session equity put/call volume ratio slipped to 0.58, while the 10-day moving average dipped to 0.63.
Taking a closer look at Wednesday’s volume, Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) drew a spike in put volume following approval of Mylan N.V. generic multiple sclerosis treatment. Elsewhere, Netflix, Inc. (NASDAQ:NFLX) was popular with call options traders after UBS boosted its price target. Finally, JPMorgan Chase & Co. (NYSE:JPM) was flooded with calls ahead of today’s ex-dividend date.
Teva Pharmaceutical Industries Ltd (ADR) (TEVA)
TEVA stock plunged more than 14% yesterday, driving options traders into a mixed frenzy of bargain hunting and chasing the fall. The spark for TEVA’s drop was the FDA’s approval of Mylan’s generic version of blockbuster multiple sclerosis treatment Copaxone. Copaxone is currently the leading MS therapy worldwide, and accounted for $4 billion in revenue for Teva last year.
The news kicked off a firestorm in TEVA’s options pits, with volume soaring to more than three times the stock’s daily average — about 160,000 contracts. However, traders appeared mixed as to whether to chase the decline or bet on a rebound. In fact, call options made up some 54% of yesterday’s activity.
Overall, short-term TEVA options traders were largely positive prior to the news. TEVA’s October put/call open interest ratio currently rests at 0.66, with calls nearly doubling puts among front-month options. However, fallout from Mylan’s generic win could erode this confidence in the coming weeks.
Netflix, Inc. (NFLX)
UBS believes that Netflix will once again shock investors with better-than-expected subscriber growth. According to the ratings firm, Netflix will add 850,000 domestic and 3.95 million international subscribers in the third quarter, compared to the consensus estimate for 796,000 domestic and 3.64 million international. As a result, UBS lifted its price target to $225 from $190 on NFLX stock.
NFLX stock rose nearly 3% on the news, and options traders were happy to oblige the rally. Volume topped 147,000 contracts, nearly doubling Netflix’s daily average, while calls snapped up 61% of the day’s take.
That said, the bears remain in full control of the October options series. Currently, the front-month put/call OI ratio stands at a lofty 1.25, with puts easily outnumbering calls. What’s more, this options series will be the most impacted by Netflix’s Oct. 16 quarterly earnings report. In other words, NFLX options speculators are anticipating a post-earnings plunge for the shares.
JPMorgan Chase & Co. (JPM)
It’s dividend time again for JPMorgan stockholders. JPM stock trades ex-dividend today, with holders as of the close last night eligible for a payout of 56 cents per share on October 31. As is always the case ahead of ex-div dates, options traders were out in force with capture plays.
For JPM, that meant a volume spike to more than 332,000 contracts — more than 4.5 times the stock’s average daily volume. JPM call options made up about 89% of the day’s take, as calls are typically the most popular vehicle for dividend capture strategies.
That said, JPM stock has shown strong price action recently, and a few bullish plays on the stock itself — and not the dividend — may have been sprinkled throughout yesterday’s action.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.