U.S. stock futures are trading broadly higher this morning. Wall Street is looking to recover from heavy losses in the tech sector this week. However, the major market indices are headed toward 4% losses across the board for March.
Against this backdrop, Dow Jones Industrial Average futures are up 0.36%, S&P 500 futures have added 0.40% and Nasdaq-100 futures have rallied 0.83%.
Turning to the options pits, puts took command amid heavy selling pressure on Wall Street. About 18.4 million calls and 20.8 million puts changed hands on the session. The CBOE single-session equity put/call volume ratio slipped to 0.68. The 10-day moving average held at 0.68.
Taking a closer look at yesterday’s options activity, volume spiked on Amazon.com, Inc. (NASDAQ:AMZN) after reports surfaced that President Trump is mulling going after the company. Meanwhile, Advanced Micro Devices, Inc. (NASDAQ:AMD) saw a bounce in call volume despite continued pressure in cryptocurrencies. Finally, General Electric Company (NYSE:GE) calls were popular on speculation of a Warren Buffett investment.
Amazon.com, Inc. (AMZN)
President Trump has targeted Amazon for some time, especially since CEO Jeff Bezos also owns the Washington Post. Reports surfaced yesterday that Trump may be on the verge of doing something about his Amazon obsession.
The president reportedly wondered aloud if there was a way to take down Amazon with antitrust or competition law. “Trump’s wealthy friends tell him Amazon is destroying their businesses,” an Axios story reported.
AMZN stock dropped more than 4% on the news, driving speculation in the options pits. Options volume topped 238,000 contracts yesterday, nearly doubling Amazon’s daily average. Calls made up an above average 57% of the day’s take.
Call activity has ramped up on Amazon stock in the past couple of weeks. For instance, the April put/call open interest ratio has ticked lower from readings north of 0.80 to their current perch at 0.78. In other words, Amazon options traders are growing more bullish on a near-term rebound for the shares.
Advanced Micro Devices, Inc. (AMD)
I’ve long said that the real reason to own AMD stock has nothing to do with cryptocurrencies. Earlier this week, Susquehanna made the opposing case, saying that shifts in Ethereum mining would significantly hurt AMD’s bottom line. Yesterday, AMD refuted that claim.
In an unsigned blog post, AMD said that “on our Q4’17 earnings conference call we stated that the percentage of annual revenue related to Blockchain was approximately mid-single digit percentage in 2017.”
AMD is right, but it may not be until the company’s quarterly earnings report next month that traders take notice. The cryptocurrency hype is just too great in the market right now.
For instance, AMD stock options traders have begun to back away from the shares. Yesterday, volume only rose to 277,000 contracts, or about 80% of the stock’s daily average. Calls barely eked out a win with 55% of the day’s take.
That said, I would expect AMD calls to make a big comeback heading into earnings as smart money bets on a rebound in this undervalued semiconductor stock.
General Electric Company (GE)
GE stock has come on strong in the past two days. In fact, the shares have rallied 4.3% — their biggest two-day gain in more than two years. The drivers for this rebound are rumors that Warren Buffett might be interested in taking a stake in the company.
“In many ways, GE’s current situation fits the profile of an ideal Warren Buffett investment,” RBC said in a research note on Tuesday.
GE stock has also seen a spike in call options activity. On Wednesday, volume topped 312,000 contracts, with calls making up 65% of the day’s take. What’s more, the April put/call OI ratio has fallen this week to a near-term low of 0.60.
This rising optimism is a bullish sign for GE stock, but traders may want to wait for the pattern of lower highs and lower lows to end before jumping back in.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.
