U.S. stock futures are trading broadly higher this morning, with tech stocks leading the way amid a continued rebound from recent panic losses. Improvements in geopolitical sentiment are helping to bolster stocks, as the Senate and House passed a two-week spending bill to avert a government shutdown, while progress in Brexit talks sent stocks higher overseas.
Heading into the open, Dow Jones Industrial Average futures have gained 0.18%, S&P 500 futures have added 0.24% and Nasdaq-100 futures have surged 0.47%.
On the options front, volume was anemic on Thursday, as only about 15.3 million calls and 12.1 million puts changed hands yesterday. As for the CBOE, the single-session equity put/call volume ratio fell to 0.58, while the 10-day moving average held at a 12-month low of 0.58.
Taking a closer look at Thursday’s options activity, Bank of America Corp (NYSE:BAC) saw an influx of call options activity following a bullish note on the banking sector from analysts at CFRA. Elsewhere, Alibaba Group Holding Ltd (NYSE:BABA) was in focus with options speculators after announcing a collaboration with U.S. automaker Ford Motor Company (NYSE:F). Finally, General Electric Company (NYSE:GE) saw surprisingly upbeat options activity after announcing it was cutting 12,000 jobs from its energy unit.
Bank of America Corp. (BAC)
Between progress on the Republican tax plan and an announcement earlier in the week that it was buying back $5 billion in stock, Bank of America has been on fire this week. BAC stock received another boost on Thursday after analysts at CFRA said that investors would rotate away from technology stocks and into the financial sector in 2018. What’s more, BAC would be among the biggest winners of this sector shift, according to CFRA.
Options speculators picked up the pace of BAC call option speculation on Thursday following the news. Volume swelled to 395,000 contracts, with calls snapping up an above average 76% of the day’s take. Furthermore, quite a few of these call options were of the buy-to-open variety.
For instance, data from Trade-Alert.com reveals that a block of 19,150 Dec $29 calls traded early in the session for the ask price of 23 cents, or $23 per contract. BAC is on the verge of overtaking this strike in premarket trading this morning.
Not all of the big BAC blocks were bullish, however, as a pair of 18,000 contract blocks traded on the January 2018 $30 put and call strikes — with the puts bought to open and the calls sold to open. This particular spread appears to be a risk reversal play that benefits if BAC declines heading into January 2018 expiration.
Alibaba Group Holding Ltd (BABA)
Alibaba continues to court American businesses so it can sell those goods back home in China. The company’s latest collaboration is with U.S. automaker Ford. The two said yesterday that they would be working together to explore more ways for Chinese consumers to buy and own Ford vehicles. Per the terms of the deal, Ford has signed a three-year agreement to test marketing, cloud computing and distribution strategies.
BABA call option activity surged on the news, with the typically bullish bets making up 73% of the more than 208,000 contracts traded yesterday. Overall, the December put/call open interest ratio has fallen in the past week and now rests at 0.70, with calls now outnumbering puts among near-term options.
Currently, the $200 call strike is the most popular in December, with more than 48,000 contracts. However, the near-the-money $180 call has gained momentum, and now sports OI of roughly 35,000 contracts. BABA is quickly headed toward $180 in pre-market trading.
General Electric Company (GE)
Beleaguered GE was back in the financial headlines yesterday after announcing it was laying off 12,000 workers in its energy and power division — nearly one-fifth of the units workforce. “They clearly misjudged the shift that’s going on in the market,” said analysts at Vertical Research Partners. The shift refers to the global shift toward renewable energy and away from fossil fuels. To that end, GE’s $10 billion acquisition of Alstom SA’s natural gas assets two years ago now added considerable pain for the company.
Still, GE options traders took the layoffs as a bullish sign. Volume neared 183,000 contracts, while calls made up 68% of the day’s take.
Additionally, the January 2018 put/call OI ratio has slipped to 0.78 from a reading just shy of 1.0 in the past month. Despite options traders looking to call a bottom, GE stock is still in freefall mode.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
