If you’re still trading today, you’re among the minority. Volume has thinned out considerable this week ahead of the Thanksgiving holiday. Low volume typically brings a drift higher on Wall Street, and U.S. stock futures are doing just that this morning.
Aside from a smattering of quarterly earnings reports, investors will be eying minutes from the most recent Federal Reserve meeting and reports on durable goods and consumer sentiment.
Heading into the open, Dow Jones Industrial Average futures are up 0.14%, while S&P 500 futures have gained 0.05% and Nasdaq-100 futures have rallied 0.08%.
On the options front, volume was surprisingly robust on Tuesday. Overall, about 18.3 million calls and 12.2 million puts changed hands. On the CBOE, the single-session equity put/call volume ratio ticked lower to 0.58, while the 10-day moving average finally relented it’s hold on multi-week highs and slipped to 0.64.
Diving into Tuesday’s options activity, Apple Inc. (NASDAQ:AAPL) saw increased call options activity following the publication of data on it’s self-driving car program. Meanwhile, Facebook Inc (NASDAQ:FB) calls were active as FB stock broke above technical resistance at $180. Finally, Vodafone Group Plc (ADR) (NASDAQ:VOD) trades ex-dividend today, meaning yesterday’s call bonanza was a cash grab by options traders.
Apple Inc. (AAPL)
Computer scientists at Apple published research yesterday on how it’s artificial intelligence can for self-driving cars can better spot cyclists and pedestrians while using fewer sensors. The research was posted online and was Apple’s first publicly released paper on autonomous vehicles.
AAPL stock rose nearly 2% following the news, although anticipation for strong Black Friday sales was also likely part of the buying mix. Options traders were also in a bullish mood, as calls made up 69% of the more than 555,000 contracts traded on AAPL yesterday.
Expectations in the AAPL options pits remains considerably elevated, despite the stock’s lofty heights. The December put/call open interest ratio currently rests at 0.53, with puts practically doubling calls among front-month options. What’s more, peak call OI for the series totals 51,000 contracts at the overhead $180 strike, indicating that options traders are looking for AAPL to rally another 4% to 5% before December options expire.
Facebook Inc (FB)
FB stock is once again on the hot list after the shares broke out above near-term resistance at the $180 level. FB broke above $180 on Oct. 31 following Facebook’s quarterly earnings report, but the shares were unable to hold ground. As a result, FB stock had been locked beneath resistance in the region ever since. The shares’ breakout would have more significance if it didn’t occur during a light trading week however, so traders should proceed with caution.
Options traders, meanwhile, are planning to ride this rally out. Volume on Tuesday jumped to 241,000 contracts, with calls snapping up 64% of the day’s take. This level of optimism stands in contrast to the uncertainty in FB’s December series.
Specifically, the December put/call OI ratio has risen in recent weeks to arrive at 0.80, with calls and puts just shy of parity. This reading is also in the upper 10% of all those taken in the past year for FB stock, which typically sees a monthly put/call OI ratio in the lower 0.60 range. In short, investors remain largely wary of FB stock over the short term.
Vodafone Group Plc (ADR) (VOD)
VOD calls were flying off the shelves like Black Friday doorbusters on Tuesday. Practically 100% of all VOD options activity was comprised of call contracts (the table above rounds up) yesterday, while volume itself rocketed to more than 42 times the stock’s daily average.
Regular readers of this column (and VOD stockholders) know that this activity typically indicates one thing: an ex-dividend date. Yesterday was the last day to own/control VOD stock if you wanted to collect the Vodafone’s 56 cent-per-share dividend payout on next month.
One of the ways options traders do this, without actually buying the stock, is to purchase in-the-money call options.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.