Wednesday's Vital Data: JPM, NFLX, TWTR >>> READ MORE

Wednesday’s Vital Data: Bank of America Corp (BAC), Roku Inc (ROKU) and Home Depot Inc (HD)

Options activity provides a look at expectations on BAC, ROKU and HD

By Joseph Hargett, InvestorPlace Contributor

U.S. stock futures are trading broadly higher this morning, as Wall Street eyes Dow 24K. Positive sentiment is helping push the Dow Jones Industrial Average toward this record benchmark, after the Senate Budget Committee voted to advance a Republican tax bill.

Wednesday’s Vital Data: Bank of America Corp (BAC), Roku Inc (ROKU) and Home Depot Inc (HD)Economic data is also providing lift, with a second estimate on U.S. third-quarter gross domestic product, October pending home sales and the Federal Reserve’s Beige Book all slated to arrive later this morning.

Heading into the open, Dow futures are up 0.34%, S&P 500 futures have added 0.08% and Nasdaq-100 futures are up 0.02%.

On the options front, volume exploded on Tuesday as traders began to position themselves for the end of the month. Overall, more than 22 million calls and 14.5 million puts changed hands on the session. As for the CBOE, the single-session equity put/call volume ratio plummeted to a five month low at 0.50, driving the 10-day moving average to a two month low at 0.62.

Diving into Tuesday’s options activity, Bank of America Corp (NYSE:BAC) drew a surge in call options activity after Dick Bove of Vertical Research Group listed BAC stock as a buy. Elsewhere, Roku Inc (NASDAQ:ROKU) faltered in is break-neck rally after bearish comments from Citron Research, and Home Depot Inc (NYSE:HD) was extremely call-heavy ahead of today’s ex-dividend date.

Wednesday’s Vital Options Data: Bank of America Corp. (BAC), Roku Inc (ROKU) and Home Depot Inc (HD)

Bank of America Corp (BAC)

Buy Bank of America and short Goldman Sachs Group Inc (NYSE:GS); that’s what Vertical Research Group analyst Dick Bove told viewers of CNBC’s Trading Nation in a recent interview. “Bank of America is phenomenally good,” Bove told viewers, highlighting the company’s growth potential in deposits and calling for BAC stock to rise 10% per year for the next five years.

Options traders rallied behind the bullish commentary. BAC stock saw volume soar to 576,000 contracts, or more than double the stock’s daily average. Calls made up an equally above average 80% of yesterday’s take.

That bullish outlook remains largely long-term, however, as short-term BAC traders remain conservative. Specifically, the December put/call open interest ratio for BAC stock comes in at 0.81, with puts and calls in near parity.

Roku Inc (ROKU)

ROKU stock surged more than 23% earlier this week after analysts at Needham compared the company to Netflix, Inc. (NASDAQ:NFLX) and said the shares could top $50. But short-side firm Citron called the analysis “irresponsible,” tweeting “Unless $ROKU finds a way to stream a BTC — this stock is MUCH LOWER…caveat emptor.”

ROKU options traders have lept into action on the volatile stock this week, sending more than 135,000 contracts across the tape yesterday — more than quadruple ROKU’s average. Calls edged out puts on the day, but just barely, as traders appeared to both take profits and prepare for a correction in the shares.

Looking at ROKU’s December options configuration, the put/call OI ratio has ballooned to a lofty perch of 1.71, with puts nearly doubling calls for the series. Most of these contracts appear to be deep out-of-the-money put sell positions, though some outright bearish bets are emerging at the $45 and $46 strikes.

As I recently noted, ROKU stock is worth owning long-term, and a pullback to the $35-$37 region is still in the cards.

Home Depot Inc (HD)

Shares of Home Depot have recently broken out to fresh all-time highs due to a strong U.S. housing market and solid quarterly earnings. The shares are taking a bit of a break today, however, as HD stock trades ex-dividend. This event brought out HD options traders in droves yesterday, as volume spiked to 227,000 contracts, or more than six times the stock’s daily average.

As is typical with dividend season, HD options traders were call heavy; they made up 84% of yesterday’s take.

These calls are more than likely related to dividend capture plays, as traders look to cash in on Home Depot’s quarterly dividend of 89 cents per share, payable on Dec. 14.

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

Article printed from InvestorPlace Media,

©2019 InvestorPlace Media, LLC