U.S. stock futures are rising heading into the open, as Wall Street returns from the Thanksgiving holiday weekend. Retailers remain in focus, as Black Friday numbers roll in amid a fresh influx of shopping on Cyber Monday. Amazon.com, Inc. (NASDAQ:AMZN) and Macy’s Inc (NYSE:M) both continue to grab headlines this morning.
At last check, Dow Jones Industrial Average futures were up 0.03%, while S&P 500 futures had gained 0.02% and Nasdaq-100 futures were off 0.07%.
On the options front, volume was nearly non-existent on Friday (yes, the market was open). Overall, only about 9.2 million calls and 6.6 million puts changed hands. On the CBOE, the single-session equity put/call volume ratio rose to 0.62, while the 10-day moving average hit a two-week low of 0.63.
Diving into Friday’s options activity, Amazon was front and center amid retailers attracting Black Friday call options activity due to reports that holiday shoppers were on track to spend more this year than in previous shopping seasons. Macy’s was also a subject of options speculation, as analysts projected a strong performance based on a beefed up online shopping platform. Finally, Qualcomm, Inc. (NASDAQ:QCOM) was in focus after reports surfaced that Broadcom Ltd (NASDAQ:AVGO) was considering boosting its takeover bid for the chipmaker.
Amazon.com, Inc. (AMZN)
According to Adobe Analytics, Black Friday sales are expected to have hit a record high $5 billion this year, with another $6.6 billion for online retailers on Cyber Monday. AMZN stock rallied more than 2.5% on Friday following the reports, albeit amid light holiday volume. Still, Amazon stock is still rising this morning, gaining half-a-percent in premarket activity.
Amazon has dominated the retail space in recent years, especially on Black Friday and Cyber Monday, due to the convenience of shopping from home in your pajamas — it’s what I did this year, and one of the major reasons I’m bullish long-term on AMZN stock.
AMZN options traders rallied behind Amazon’s continued retail dominance on Friday, with volume jumping to over 214,000 contracts, or nearly double the stock’s daily average despite an extremely light trading session. Calls made up 57% of the day’s take, which is above average daily call activity for AMZN stock during the past month.
Short-term expectations through December expiration are not quite as bullish, however. The December put/call open interest ratio comes in at 1.35, with puts easily outnumbering calls among front-month options. This negativity is understandable with the shares trading near all-time highs, but these bears may get burned as AMZN rallies through the holiday season.
Macy’s Inc (M)
Being a mainly brick-and-mortar retailer, Macy’s is a dark horse for bulls this holiday shopping season. According to Longbow Asset Management, this season may be traditional retail’s last chance to say, “This is still our season.” Macy’s appears to be on track to do just that, even while bolstering its online presence to compete with Amazon.
M stock gained more than 2% on Friday, as speculation over strong holiday shopping demand drove the retailer higher. The shares are also roughly half-a-percent higher in premarket activity.
M options traders weren’t as positive, however, and appeared to fade Friday’s rally. Volume came in at 94,000 contracts, with puts making up 62% of the day’s take. Surprisingly, December options are considerably more optimistic than AMZN.
The front-month put/call OI ratio has fallen to 0.70, with calls clearly the favorite choice among short-term speculators. Peak call OI, for example, totals 12,000 contracts at the at-the-money Dec $21 strike, with another 10,000 calls open at the $22 strike.
Qualcomm, Inc. (QCOM)
Reports emerged on Friday that Broadcom was considering increasing its unsolicited bid for Qualcomm. On Nov. 6, Broadcom offered offered $103 billion for Qualcomm, or roughly $60 per share with $10 per share in BRCM stock. Qualcomm rejected the offer, with shareholders saying they expected $80 per share. Broadcom is reportedly looking at increasing its stock offering in the deal to make up the difference to avoid taking on additional debt.
Naturally, Qualcomm options speculators jumped on the news, sending more than 107,000 contracts across the tape. Calls gobbled up 77% of the day’s take, well above QCOM’s daily average.
As a result, QCOM’s December put/call OI ratio has plummeted in the past several weeks to a near-term low of 0.44, with calls more than doubling puts for the series. Qualcomm stock is now trading just below the $70 offer from BRCM, and peak December call OI of 41,0000 contracts is, unsurprisingly, located at the $70 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.