U.S. stock futures are mixed this morning, as Wall Street prepares for Janet Yellen’s last Federal Open Market Committee meeting as Board Chair. Throwing a wrench into the mix this morning was Democrat Doug Jones’ win in the Alabama senate race, defeating Republican candidate Roy Moore. Investors are pondering what Jones’ win means for the future of the Republican tax plan.
Heading into the open, Dow Jones Industrial Average futures are up 0.04%, S&P 500 futures are down 0.04% and Nasdaq-100 futures have added 0.07%.
On the options front, volume was brisk on Tuesday, with a hefty 18.3 million calls and 12.4 million puts changing hands yesterday. As for the CBOE, the single-session equity put/call volume ratio fell to a two week low of 0.51, while the 10-day moving average once again held at a 12-month low of 0.58.
Taking a closer look at Tuesday’s options activity, AT&T Inc (NYSE:T) saw call options swell as analysts came out to extol the virtues of the Republican tax plan for the communications firm.
Elsewhere, Comcast Corporation (NASDAQ:CMCSA) shares rose after the company backed out of the bidding war for Twenty-First Century Fox Inc (NASDAQ:FOX) assets. Finally, Tesla Inc (NASDAQ:TSLA) popped once again after PepsiCo, Inc. (NYSE:PEP) placed a preorder for 100 electric semi-trucks.
AT&T Inc. (T)
AT&T drew heavy options volume yesterday, as more than 512,000 contracts traded on T stock — more than tripling the T’s daily average. What’s more, calls made up 79% of the day’s take. As a result, T’s January 2018 put/call open interest ratio has fallen in the past month from a perch above 1.0 to its current reading at 0.84.
The wealth of call volume lately is in direct response to hopes that the Republican tax plan will pass and be signed into law. AT&T stands to gain big from the plan, as analysts at MoffettNathanson reminded investors yesterday. According to the research firm, “Companies that pay high cash taxes — Comcast, for example, but also Verizon and AT&T — will benefit.”
In fact, T stock is up nearly 16% since the legislation was introduced in November. T call options traders are targeting the $40 strike in the January 2018 series, with more than 140,000 contracts currently in residence here.
Comcast Company (CMCSA)
CMCSA stock also saw a tax-plan related boost on Tuesday, but the big news was Comcast’s backing out of the bidding war for Fox assets. The move leaves Walt Disney Company (NYSE:DIS) as the lone bidder for Twentieth Century Fox television and movie studios, which includes FX and National Geographic Channel.
Comcast stock rose nearly 3% on the news, and call options traders flooded into the shares. Volume topped 158,000 contracts, more than tripling CMCSA’s daily average. Calls made up 53% of the day’s take, and while this may seem a little light, this is actually heavy call activity for CMCSA stock.
For example, the January 2018 put/call OI ratio currently arrives at a lofty perch of 1.34, with puts easily outnumbering calls. Peak put OI of more than 60,000 contracts currently resides at the $37.50 strike in January, with another 60,000-plus contracts open at the deeper out-of-the-money $35 and $32.50 strikes.
Tesla Inc (TSLA)
Fresh off yesterday’s Model 3 news, TSLA stock rallied again after PepsiCo placed a preorder for 100 of Tesla’s electric semi-trucks. Pepsi currently holds the largest public order for Tesla’s big rig, with a Pepsi spokesperson saying the purchase reflects the company’s desire to reduce fuel costs and fleet emissions. Reservations for Tesla’s truck currently sit at 267 vehicles to date, according to Reuters.
Options traders were upbeat on the news. Volume for TSLA options came in at 207,000 contracts, or roughly 1.4 times the stock’s daily average. Calls accounted for a positive 61% of the day’s take.
That said, some of this call activity may have been closeouts of existing positions, as the January 2018 put/call OI ratio rose to 1.53 from yesterday’s perch at 1.52. Profit-taking on yesterday’s rally is the most likely cause.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.