U.S. stock futures are pointing toward triple-digit gains for the Dow Jones Industrial Average on the open this morning, as traders zero in on corporate earnings. Bank of America Corp (NYSE:BAC) headlines this morning’s reports, with Goldman Sachs Group Inc (NYSE:GS) and Charles Schwab Corp (NYSE:SCHW) also on tap.
Heading into the open, Dow Jones Industrial Average futures are up 0.41%, S&P 500 futures have added 0.34% and Nasdaq-100 futures have risen 0.30%.
Turning to the options pits, activity was extremely brisk on Tuesday. About 29.5 million calls and 20.8 million puts changed hands. The CBOE single-session equity put/call volume ratio fell to 0.49. The 10-day moving average hit lowest level in three years.
Taking a closer look at yesterday’s options activity, Bank of America call options were extremely popular ahead of this morning’s quarterly earnings report. Elsewhere, General Electric Company (NYSE:GE) drew mixed activity as breakup talk increased. Finally, Alibaba Group Holding Ltd (NYSE:BABA) was also call-option heavy after Jefferies initiated coverage on the Chinese e-commerce giant.
Bank of America Corp. (BAC)
Bank of America stock is trading higher in pre-market activity this morning. The company reported a fourth-quarter profit of 20 cents per share, down from earnings of 39 cents per share in the same quarter last year. However, earnings included a $2.9 billion write-off due to the new tax plan implemented at the end of 2017.
Excluding the tax charge and other items, Bank of America earned 48 cents per share, blowing past expectations for 44 cents per share and matching the whisper number.
BAC options traders were expecting a solid report. Volume on Tuesday surged to 819,000 contracts, more than doubling Bank of America’s daily average. Calls gobbled up 81% of the day’s take.
Among yesterday’s calls was a block of 34,000 Feb $34 strike calls that traded for 12 cents per contract. Another block of 24,000 Jan 2018 $31 strike calls that traded for 66 cents per contract was also in the mix, according to Trade-Alert.com.
General Electric Company (GE)
GE sparked breakup talks again yesterday. Chief Executive John Flannery announced more than $11 billion in charges due to its long-term care insurance portfolio and the new U.S. tax laws.
“I would categorize it as an examination of options and it’s (the) kind of thing that could result in many, many different permutations, including separately traded assets really in any one of our units, if that’s what made sense,” Flannery told investors.
GE options traders were mixed on the news. Volume rose to 480,000 contracts, more than doubling GE’s daily average. Calls only made up about 59% of the day’s take, well short of recent activity. There is still optimism among GE traders, however. Currently, the February put/call open interest ratio arrives at 0.58, with calls nearly doubling puts among soon-to-be front-month options.
We’ll see if this optimism holds up should breakup talks intensify.
Alibaba Group Holding Ltd (BABA)
Alibaba received another bullish analyst note yesterday. Jefferies initiated BABA stock with a “buy” rating and a $240 price target. According to the research firm, Alibaba could “redefine the future of commerce.” Jefferies also noted that Alibaba could reasonably achieve its goal of reaching trillion in GMV by 2020 and have more than 2 billion customers world wide by 2036.
BABA options traders were pleased with the initiation. Volume rose to 376,000 contracts, or about 1.9 times the stock’s daily average. Calls accounted for 70% of yesterday’s take.
Overall, BABA’s February put/call OI ratio rests at 0.72, near the midpoint of its annual range and hinting at a bit of complacency toward the shares.
As of this writing, Joseph Hargett was long on General Electric Company (GE) stock.
