U.S. stock futures are mixed this morning, as Apple Inc. (NASDAQ:AAPL) and Boeing Co (NYSE:BA) battle for control of the Dow Jones Industrial Average. Boeing shares are up after the company signed a $1.1 billion deal with Morocco’s Royal Air Maroc, while Apple remains under pressure due to reports of anemic iPhone X demand.
Low volume is helping to exacerbate the issue this week. Heading into the open, futures on the Dow are down 0.04%, S&P 500 futures are up 0.05% and Nasdaq-100 futures are off 0.05%.
Turning to the options pits, Tuesday’s volume was the lowest of 2017. Only about 10.6 million calls and 8.1 million puts changed hands on the session. The CBOE single-session equity put/call volume ratio fell to 0.58 and the 10-day moving average ticked lower to 0.56.
Taking a closer look at Tuesday’s options activity, Apple call volume dropped sharply following a report that the company was slated to slash first-quarter iPhone X sales forecasts.
Micron Technology, Inc. (NASDAQ:MU) was also hit by the iPhone X news, though MU call options rallied on an expected rebound. Finally, Freeport-McMoRan Inc (NYSE:FCX) drew heavy call volume as copper prices hit a three-year high.
Apple stock fell more than 2.5% on Tuesday, after a report in Taiwan’s Economic Daily said that iPhone X demand could come in below first-quarter expectations. The newspaper reported that Apple was going to slash iPhone X sales forecasts to just 30 million units, down from initial forecasts for 50 million units.
AAPL call options activity dropped sharply on the news. Overall volume remained robust, coming in at 530,000 contracts, or more than 1.2 times AAPL’s daily average. Calls, however, only made up about 57% of the day’s take, down from an average range near 63%.
Furthermore, AAPL put open interest is rising heading into January. Specifically, the January 2018 put/call open interest ratio currently rests at 1.09, up from a December reading near 0.55 in late November.
Technically, AAPL is perched on support near $170, and a breach of this region could attract more put traders and help push Apple stock lower heading into the new year.
Apple suppliers were also hit hard by reports of slackening iPhone X demand, including Micron Technology. MU stock plunged more than 4% on the news, sending the shares down to test support in the $42 region.
MU options traders were clearly spooked, as volume jumped to 288,000 contracts on Tuesday. While calls snapped up 81% of the day’s take, quite a bit of the activity appeared to be profit-taking.
For instance, the January 2018 put/call OI ratio rose from Friday’s reading of 0.60 to today’s perch at 0.62. A rising put/call OI ratio amid high call volume is indicative of call contract liquidations, or, in other words, profit-taking.
This week, China ordered its top copper producer to halt output in order to fight winter pollution levels. As a result, copper prices soared to their highest levels since 2014, with spot prices rising as much as 1.2% to $7,210 a metric ton on Tuesday. The news, combined with strong projections for copper demand in 2018 send Freeport stock soaring more than 3% higher yesterday.
FCX options traders were also emboldened. Volume surged to 180,000 contracts, or more than 2.6 times Freeport’s daily average. Calls gobbled up 81% of the day’s take.
This rise in call activity stands in stark contrast to expectations heading into January 2018. Specifically, the put/call OI ratio currently rests at 1.21, with puts easily outnumbering calls for the front-month series. With FCX in rally mode, I would expect call volume to remain robust on the shares and this put/call OI ratio to fall as expectations climb.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.