U.S. stock futures are trading broadly higher this morning. Sentiment is on the rise, especially on the Dow where General Electric Co.’s (NYSE:GE) oil & gas revenue lifted spirits. Meanwhile, the economic calendar brings the January purchasing managers’ indexes for manufacturing and services as well as December existing home sales.
At last check, Dow Jones Industrial Average futures are up 0.29%, S&P 500 futures are have added 0.20% and Nasdaq-100 futures are up 0.14%.
Turning to the options pits, volume was heavy on Tuesday. About 24.2 million calls and 16.4 million puts changed hands. The CBOE single-session equity put/call volume ratio fell to 0.54. Meanwhile, the 10-day moving average fell to 0.54, it’s lowest level in more than three years.
Taking a closer look at Tuesday’s options activity, General Electric drew mixed volume ahead of this morning’s report, with a skew toward calls. Those GE bulls are feeling good this morning with the stock up more than 2% premarket. Elsewhere, both Amazon.com, Inc. (NASDAQ:AMZN) and Microsoft Corporation (NASDAQ:MSFT) were targeted ahead of next week’s quarterly reports.
General Electric Company (GE)
When sentiment is this low on a stock, it doesn’t take much to spark a rally. General Electric reported a fourth-quarter loss of $1.23 per share on revenue of $31.40 billion. Wall Street was expecting a profit of 29 cents on revenue of $33.87 billion. However, oil and gas revenue jumped 69% to $5.76 billion and topped the consensus of $5.73 billion.
GE’s oil and gas unit has been a point of major concern for investors, prompting many to speculate on a break up of the company. It seems this morning’s report has put those breakup fears to rest, for now.
GE options traders weren’t quite optimistic ahead of today’s report. Volume rose to 712,000 contracts yesterday, more than doubling the stock’s daily average. Calls only accounted for 55% of the day’s take.
Looking ahead, GE’s February put/call open interest ratio has advanced sharply from Friday’s perch at 0.67 to today’s reading of 0.74. Clearly, GE is not out of the woods yet, and options traders continue to increase their bets against the shares.
Amazon.com, Inc. (AMZN)
Corporate earnings pick up the pace next week, and options traders are already gearing up. Amazon releases fourth-quarter earnings on Thursday, February 1. Currently, analysts are expecting a profit of $1.84 per share, up from $1.54 a year ago. Revenue is expected to rise 36.7% to $59.81 billion.
Options traders were cautiously optimistic yesterday. AMZN options volume rose to 171,000 contracts, with calls making up 56% of the day’s take. What’s more, the weekly February 2 put/call OI ratio rests at 0.87, with puts on the verge of matching calls for the series.
February 2 implieds are pricing in a potential post earnings move of about 6.5% for Amazon stock. This places the upper bound at $1,451, while the lower bound of the expected move rests at $1,274.
Microsoft Corporation (MSFT)
This king of software, Microsoft will also release its quarterly report next week. The company is expected to report a profit of 86 cents per share on Wednesday, up from 80 cents per share last year. Revenue is expected to rise 8.9% to $28.39 billion. The whisper number comes in at 90 cents per share.
MSFT options traders appear to be ramping up their bullish positions ahead of the event. Volume yesterday rose to 166,000 contracts, with calls making up 64% of the day’s take. There is a lot of room for growth, however, as the February 2 put/call OI ratio rests at 0.79.
As for expectations, February 2 implieds are pricing in a post earnings move of 4.4%. This places the upper bound at $96 and the lower bound at $87.93.
As of this writing, Joseph Hargett held a long position in General Electric Company (GE).
