Wall Street is seeing red this morning, as U.S. stock futures point to extended losses. The headline Dow Jones Industrial Average is headed toward triple-digit losses on the open, as tax plan worries and falling oil prices combined to push stocks lower. Crude was down more than 1% after the American Petroleum Institute reported a surprise buildup in U.S. inventories.
Heading into the open, Dow futures were down 0.51%, S&P 500 futures had plunged 0.48% and Nasdaq-100 futures were lower by 0.41%.
On the options front, volume rebounded on Tuesday, with about 17.7 million calls and 12.9 million puts changing hands. On the CBOE, the single-session equity put/call volume ratio dipped to 0.62, with the 10-day moving average rose to a one-month high of 0.65.
As for Tuesday’s options activity, Apple Inc. (NASDAQ:AAPL) was active after the U.S. International Trade Commission (USITC) launched an investigation into allegations of patent infringement. Meanwhile, JD.com Inc(ADR) (NASDAQ:JD) drew heavy call volume despite a downgrade from Morgan Stanley. Finally, Microsoft Corporation (NASDAQ:MSFT) dividend capture plays were everywhere yesterday ahead of the company’s ex-dividend date.
Apple Inc. (AAPL)
Apple is once again at the center of a patent dispute, but this time the USITC is getting involved. The agency said it was following up on complaints from Aqua Connect Inc and Strategic Technology Partners of Orange, California. According to the USITC, it is investigating patents related to certain Apple Mac computers, iPhones, iPads, iPods and Apple TVs.
The negative press comes at a bad time for AAPL stock. The shares are retreating from recent highs near $175, and AAPL’s decline yesterday took the shares below support at their 10-day moving average. Today’s heavy market selling threatens to push AAPL back below $170.
AAPL options traders don’t appear too worried, however. Volume on Tuesday topped 363,000 contracts, with calls accounting for an above-average 64% of the day’s take. December, meanwhile, is thick with call open interest.
Currently the back-month put/call OI ratio comes in at 0.48, with calls more than doubling puts heading into the final expiration month of 2017. Peak call OI for December totals nearly 52,000 contracts at the overhead $180 strike.
JD.com Inc(ADR) (JD)
JD stock gave back nearly all of its post-earnings and Singles Day gains yesterday. The culprit for the decline was a downgrade to “equal weight” from “overweight” at Morgan Stanley. According to the brokerage firm, JD stock “is likely to take a breather as apparel headwinds temper near-term GMV growth.” Morgan Stanley recommended clients wait for a better entry point.
JD stock options traders were not deterred, though. Volume nearly tripled JD’s daily average at 269,000 contracts, with calls gobbling up 75% of the day’s take. The recent call activity on JD has pushed the stock’s December put/call OI ratio down to a near-term low of 0.62, indicating that options traders are betting on a continued run from the shares heading into 2018.
Microsoft Corporation (MSFT)
MSFT stock was once again the target of ex-dividend options trades yesterday. Volume surged to over 660,000 contracts, or more than five times the stock’s daily average. Calls, naturally, made up roughly 95% of the day’s activity.
Among the notable trades on MSFT were a pair of blocks totaling roughly 26,000 contracts at the Dec $80 and Jan 2018 $80 calls. Both appeared to have been sold to open so as to give the seller(s) control of MSFT long enough to capture Microsoft’s dividend payout.
Shareholders of record as of the close yesterday are eligible for a dividend payout of 42 cents per share, payable on Dec. 14.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
