U.S. stock futures are trading broadly lower this morning, as Wall Street digests another record close for the major U.S. indices. Corporate earnings still abound, and Snap Inc (NYSE:SNAP) is hurting after last night’s abysmal showing. Meanwhile, traders still have their eyes glued to President Trump’s Asia trip and the rising tension surrounding the Republican tax bill.
Heading into the open, Dow Jones Industrial Average futures have shed 0.03%, S&P 500 futures are down 0.06% and Nasdaq-100 futures are up 0.03%.
On the options front, volume continued to pull back on Tuesday, with about 16.3 million calls and 15.5 million puts crossing the tape yesterday. On the CBOE, the single-session equity put/call volume ratio ticked higher to 0.64, while the 10-day moving average held at a one-month low of 0.63.
As for Tuesday’s options activity, Facebook Inc (NASDAQ:FB) saw a ramp up in call activity after the company showcased its Workforce platform at Salesforce.com, Inc.’s (NYSE:CRM) Dreamforce conference in San Francisco. Elsewhere, Advanced Micro Devices, Inc. (NASDAQ:AMD) was also popular with bulls following its partnership with rival Intel Corporation (NASDAQ:INTC). Finally, Snap bulls will be sorely disappointed this morning, as SNAP stock is plunging following last night’s poor third-quarter earnings report.
Facebook Inc (FB)
Facebook is serious about moving into the corporate social media space. The company showed its resolve by pushing its Workforce platform at yesterday’s Dreamforce software conference. According to Facebook, some 30,000 organizations are using Workforce, including Wal-Mart Stores Inc (NYSE:WMT). Additionally, Facebook backed its plan to teaming up with Salesforce to further improve its service to corporate users.
Options traders appeared to take the news well, with calls making up roughly 60% of yesterday’s total volume. Volume has been low for FB options lately, however, coming in at just 178,000 contracts yesterday — about 67% of the stock’s daily average. Call volume (as a percentage of daily activity) was also below FB’s average in the 65% to 66% range.
It would appear that with FB stock trading near all-time highs north of $180 that options traders are wary of betting on a continued run — especially with the rest of the market looking a bit top heavy heading into 2018. I would expect more of this cautious behavior from Facebook options traders for the time being.
Advanced Micro Devices, Inc. (AMD)
AMD is teaming up with rival Intel to deal with the rising threat of Nvidia Corporation (NASDAQ:NVDA). The duo will be producing a platform with an Intel processor and an AMD graphics chip in what Intel calls a “thinner, lighter, more powerful enthusiast mobile platform that delivers a premium experience.”
AMD initially surged on the news when it broke on Monday, with the shares eclipsing $12 after hitting a multimonth low near $11 following earnings. Options traders have responded by loading up on AMD calls, and yesterday was no different. Volume jumped to 265,000 contracts, with calls gobbling up 85% of the day’s take.
Buried amid yesterday’ call activity was a rather large Jan 2018 $12/$13 bull call spread. Both sides of the spread totaled 10,000 contracts, and it went off at an total ask price of 40 cents, or $40 per pair of contracts, according to data from Trade-Alert.com. The total profit on this trade would be $60 per pair of contracts, or about a 50% return on the initial investment.
Snap Inc (SNAP)
SNAP stock was off as much as 21% in after hours trading last night. The company sorely disappointed investors when it reported a loss of 36 cents per share on revenue of $207.9 million, whiffing the consensus for a 33 cents loss on revenue of $236 million. However, the shares are sharply off their lows this morning following news that Chinese firm Tencent Holdings Ltd. (OTC:TCEHY) has taken a 17% stake in SNAP Class A shares.
That said, SNAP is still down about 12% premarket, and it’s little consolation to bullish options traders. Volume yesterday ballooned to 304,000 contracts, more than quadrupling SNAP’s daily average. Calls made up 62% of the day’s take as traders bet on a post-earnings rally from SNAP.
In fact, Trade-Alert.com data shows that one investor bought 10,770 Nov $16 calls for about 78 cents, or $78 per contract, yesterday. Barring any significant bullish news, SNAP will likely close out November expiration well below $16.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.