Wednesday’s Vital Data: Micron Technology, Inc. (MU), Tesla Inc (TSLA) and Alibaba Group Holding Ltd (BABA)

U.S. stock futures are headed toward record highs once again this morning. Senate Republicans passed the tax bill and sent it back to the House for approval. The tax plan had several budget rules violations that the Senate stripped out. The House is expected to vote on the plan today and send it to President Trump’s desk for signing this week.

With the tax plan now on the verge of implementation, Wall Street is in rally mode once again. Heading into the open, futures on the Dow Jones Industrial Average are up 0.34%, with S&P 500 futures gaining 0.31% and Nasdaq-100 futures rising 0.38%.

Options volume died off on Tuesday. Only about 14.8 million calls and 12.2 million puts changed hands on the session. The CBOE single-session equity put/call volume ratio rose to 0.53 and the 10-day moving average held at 0.58.

Turning to Tuesday’s options activity, Micron Technology, Inc. (NASDAQ:MU) drew heavy call volume ahead of last night’s quarterly earnings report. Meanwhile, Tesla Inc (NASDAQ:TSLA) options were mixed despite a new order for 125 semi-trucks from United Parcel Service, Inc. (NYSE:UPS). Finally, Alibaba Group Holding Ltd (NYSE:BABA) is getting double-teamed in China as Tencent Holdings Limited (OTCMKTS:TCEHY) and JD.com, Inc. (NASDAQ:JD) team up against the country’s biggest e-commerce retailer.

Micron Technology, Inc. (MU)

Micron put to rest the recent analyst reports of a slowdown in semiconductor demand. Micron reported quarterly earnings of $2.45 per share on revenue of $6.80 billion. Revenue was up 71% year-over-year and bested Wall Street’s target for sales of $6.39 billion. Earnings topped the consensus by 25 cents per share.

What’s more, operating cash flow surged 220% from the same quarter last year to $3.64 billion. In the accompanying conference call, Micron CEO Sanjay Mehrotra said, “Micron’s strong results were driven by double-digit sequential revenue growth in mobile, server and SSD applications, with expanded gross margins and improved profitability.”

MU options traders were bullish heading into the report. Volume rose to 408,000 contracts, with calls making up 68% of the day’s take. Looking out to January 2018, MU options traders remain quite bullish. The January 2018 put/call open interest ratio currently rests at 0.63, with calls on the verge of doubling puts among back-month options. Peak call OI for the series totals more than 96,000 contracts and rests at the overhead $50 strike.

Tesla Inc (TSLA)

TSLA stock extended its recent decline on Tuesday, dropping roughly 2.3% to test support near $330. The decline came despite UPS announcing a pre-order of 125 electric semi-trucks from Tesla. It was the largest such order to date, outstripping Pepsico’s order of 100 semi-trucks last week.

TSLA options traders appeared reluctant to jump on board with Tesla on Tuesday. Volume rose to 151,000 contracts, with calls only accounting for 59% of the day’s take. That said, put OI is falling in the January 2018 series.

The put/call OI ratio for January 2018 arrives at 1.51 this morning, down from 1.53 on Wednesday last week. A continued unwinding of this pessimism could have a buoying effect on TSLA stock.

Alibaba Group Holding Ltd (BABA)

The problem with being at the top is that it places a rather large target on your back. Both Tencent and JD.com have taken aim at Alibaba by taking out large stakes in online discount retailer Vipshop Holdings Limited (NYSE:VIPS). Tencent is investing $604 million for a 7% stake in Vipshop, while JD.com is investing $259 million for a 5.5% stake.

The pairing of China’s largest messaging and online gaming company with the country’s No. 3 online retailer didn’t seem to phase BABA options traders too much. Options volume on BABA stock rose to 159,000 contracts, with calls snapping up 66% of the day’s take.

Furthermore, call OI is rising faster than put OI in the January 2018 series. The back-month put/call OI ratio has fallen from a reading north of 1.0 back in November to its current perch at 0.93.

That said, with BABA off about 11% since its November highs, this activity may be the result of profit taking. Traders should keep a close eye on BABA options activity for signs of rising call activity to see if the shares are expected to rebound from their current retreat.

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

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