U.S. stock futures are pointed sharply higher this morning. The major market indices are on track to extend yesterday’s rebound, which saw the Dow Jones Industrial Average gain 669 points.
Easing fears of a trade war are helping to drive stocks higher. Yesterday, Treasury Secretary Steven Mnuchin said that he was “… cautiously hopeful we reach an agreement,” but noted that “if not we are proceeding with these tariffs.”
Against this backdrop, Dow futures are up 0.59%, S&P 500 futures have added 0.58% and Nasdaq-100 futures have rallied 0.94%.
Turning to the options pits, volume dropped significantly on Monday from Friday’s surge into the weekend. Overall, about 19.1 million calls and 17.8 million puts changed hands on the session. The CBOE single-session equity put/call volume ratio plummeted to 0.63. The 10-day moving average held at one-month high levels at 0.66.
Taking a closer look at yesterday’s options activity, General Electric Company (NYSE:GE) drew heavy put volume after sinking to its lowest level since June 2009. Meanwhile, Advanced Micro Devices, Inc. (NASDAQ:AMD) was downgraded at Susquehanna on crypto concerns. Finally, AT&T Inc. (NYSE:T) saw testimony heat up in its antitrust case against the U.S. government.
General Electric Company (GE)
Just how low can GE stock go? Until recently, even I was a GE stock bull. But the shares have consistently broken out to new lows, crashing through subsequent support levels. A Wall Street Journal report over the weekend highlighted the risks lurking within GE Capital’s portfolio. The report said that GE still has risky assets it can’t unload as well as those it has unloaded and still be held liable for.
It’s no wonder GE stock options traders have continuously loaded up on puts this year. Monday was no exception. Volume topped over 444,000 contracts, with puts making up 56% of the day’s take. However, the April put/call open interest ratio comes in at 0.67, indicating that calls have gained traction among short-term speculators.
What’s more, these GE bulls are quite optimistic. Peak April call OI totals more than 100,000 contracts at the deep out-of-the-money $15 strike. That’s a 15% rally, at least, just for these contracts to trade in-the-money.
Advanced Micro Devices, Inc. (AMD)
AMD stock is receiving flack over the fall in cryptocurrency prices once again. Analysts at Susquehanna downgraded AMD stock to “negative” from “neutral” on Monday. According to Susquehanna, “The proliferation of Ethereum mining ASICs have the ability to impact ~20% of AMD’s total company revenue.”
AMD stock options traders, however, focused on calls instead of puts on Monday. Volume rose to 189,000 contracts, with calls making up 59% of the day’s take. That said, volume only amounted to about 59% of AMD’s daily average, lessening the sentiment impact of this reading.
In fact, AMD options traders are quite bearish on the shares. The April put/call OI ratio currently rests at 1.69, with puts on the verge of doubling calls among front-month options.
AT&T Inc. (T)
The U.S. government’s antitrust case against AT&T heated up yesterday. Sling TV president Warren Schlichting told the court that AT&T’s acquisition of Time Warner Inc. (NYSE:TWX) would make it tougher to negotiate for Time Warner programming and hurt subscribers. Sling TV is the online streaming service from Dish Network Corp. (NASDAQ:DISH).
The continuing court case has attracted a wealth of speculation for T stock, especially among options traders. Volume on Monday surged to over 290,000 contracts, nearly quintupling T stock’s daily average. Calls made up 54% of the day’s take.
Looking at front-month options, however, reveals a notable degree of pessimism. Currently, the April put/call OI ratio rests at 0.94, with calls and puts in near parity. Techncially, the bears have a case, as T stock is down nearly 8% since mid March.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.
