U.S. stock futures are trading broadly higher this morning. The major market indices are gaining ground following their worst weekly performance in more than two years.
Helping to improve sentiment on Wall Street are reports that the U.S. and China are holding talks to avoid a trade war. Leading these talks are Liu He, China’s economic czar, and U.S. Treasury Secretary Steven Mnuchin and U.S. trade representative Robert Lighthizer.
Against this backdrop, Dow Jones Industrial Average futures have surged 1.18%, S&P 500 futures are up 1.24% and Nasdaq-100 futures have rallied 1.64%.
Turning to the options pits, volume was well above average on Friday, with puts gaining considerable ground. Overall, about 22.4 million calls and 26.7 million puts changed hands on the session. The CBOE single-session equity put/call volume ratio ticked higher to 0.76. The 10-day moving average hit another one-month high of 0.66.
Taking a closer look at yesterday’s options activity, Alibaba Group Holding Ltd (NYSE:BABA) closed in on a Chinese listing, driving up speculation. Meanwhile, Amazon.com, Inc. (NASDAQ:AMZN) drew increased options volume after Whole Foods announced it was trimming its workforce. Finally, Tesla Inc (NASDAQ:TSLA) was in focus following reports of an end-of-quarter Model 3 production push.
Alibaba Group Holding Ltd (BABA)
Growing fears of a U.S./China trade war have had quite an impact on Alibaba stock. The shares are down more than 11% since peaking in mid-March. However, a Chinese stock market listing for BABA could give the stock a much needed sentiment lift.
According to reports from Thomson Reuters, Alibaba could list in Shanghai as soon as the middle of this year. Sources say Alibaba’s listing in China could be worth as much as 10 billion yuan ($1.58 billion).
Speculation on Friday was bullish in the wake of the report. Volume topped 240,000 contracts, with calls making up 58% of the day’s take. There is still quite a bit of short-term negativity for BABA stock, however.
Currently, the April put/call open interest ratio comes in at 0.83. This reading is up from its early March readings, but appears to finally be leveling off. A shift in sentiment here could be a bullish development for BABA stock.
Amazon.com, Inc. (AMZN)
I think we all knew that more job cuts at Whole Foods was inevitable. On Friday, word trickled down that the Amazon acquisition would be letting people go in its in-store marketing and graphic design departments.
There is no word yet on just how many jobs Whole Foods is cutting, as the company declined to comment on impacted positions or on the number of people being cut.
Amazon stock options traders were divided on the shares on Friday. Volume came in at over 237,000 contracts, nearly doubling Amazon’s daily average. Calls only made up about 54% of the day’s take.
Looking out to April expiration, the put/call OI ratio currently rests at a middling reading of 0.77. In other words, traders are neither overly bullish or bearish on AMZN stock’s prospects heading into next month. The shares did breach support at $1,500 on Friday, but appear to be poised to surge back above this level this morning.
Tesla Inc (TSLA)
According to Bloomberg, Tesla is in the middle of an end-of-quarter production surge for the Model 3. Specifically, Bloomberg projects that Tesla is making 805 Model 3s a week, bringing the total to 10,636 cars so far. Furthermore, additional projections based on VIN tracking indicate that Tesla has significant production improvements to come.
Getting Model 3 production back on track would be music to TSLA stockholders’ ears. The company has fallen off its stated projections so far this year, and has a lot of ground to make up.
As such, TSLA stock options traders are not holding their breath. Volume on Friday came in at 201,000 contracts, or about 1.5 times Tesla’s daily average. Calls came in at a near even split with puts on the day.
For April, the outlook is rather bearish. Currently, the front-month put/call OI ratio rests at a whopping 1.70, with puts nearly doubling calls among near-term options.
With TSLA stock hovering near key support at $300, a rebound here could spark an unwinding of negativity and send the shares higher. This is especially true if Tesla shows signs of Model 3 production improvements.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.