U.S. stock futures are poised for a rocky open this morning. Wall Street is attempting to shake off yesterday’s plunge, which saw tech stocks lead the way lower.
Against this backdrop, Dow Jones Industrial Average futures are up 0.17%, S&P 500 futures have added 0.12% and Nasdaq-100 futures are flat.
Turning to the options pits, volume was split down the middle on Tuesday. About 18.6 million calls and 18.8 million puts changed hands on the session. The CBOE single-session equity put/call volume ratio rebounded to 0.71. The 10-day moving average lept to a one-month high of 0.68.
Taking a closer look at yesterday’s options activity, Nvidia and Tesla traders were divided on how to respond to a pair of fatal self-driving car crashes this week. Nvidia traders loaded up on calls, while Tesla traders were split between bearish and bullish bets. Meanwhile, Twitter Inc (NYSE:TWTR) options traders tried to be bullish in the face of scrutiny from infamous short-seller Citron Research.
Nvidia Corporation (NVDA)
An Uber self-driving car struck and killed a 49-year old woman in Temple, Arizona this weekend. The Uber AI cars are powered by Nvidia chips and software. In response to the tragedy, Nvidia announced at the company’s annual GPU Conference that it was halting its self-driving tests. However, Nvidia said it would continue research in the area.
NVDA stock was hammered on the news, plunging nearly 8% yesterday. That said, NVDA options traders responded by betting on a bounce. Volume topped 328,000 contracts, with calls making up 59% of the day’s take.
Short-term options traders have grown wary of NVDA stock in recent weeks. Currently, the April put/call open interest ratio weighs in at 0.87. In other words, puts are nearly as popular as calls among front-month options traders.
Since the beginning of 2018, NVDA stock has bounced between support at it’s 50-day trendline and resistance near $250. This overhead resistance is likely making options traders more than a bit nervous at this point.
Tesla Inc (TSLA)
Tesla provided a double whammy for the AI market over the weekend. On Friday afternoon, an autopilot driver-assisted Tesla Model X SUV suffered a fatal crash, casting more doubt on the self-driving car market.
Adding to Tesla’s woes, Moody’s Investors Service downgraded TSLA’s rating. The ratings service cited Model 3 production shortfalls and liquidity concerns for the downgrade.
Tesla stock options traders were unsure how to handle the pair of reports. Volume on TSLA surged to 250,000 contracts, or about double the stock’s daily average. Calls and puts were split evenly on the day.
Bearish sentiment is nothing new for TSLA options, however. Currently, the April put/call OI ratio arrives at 1.32, with puts easily outnumbering calls among front-month options. The most popular April put is the $250 strike, with about 7,700 contracts in residence. TSLA is currently trading about 11.5% above this strike.
Twitter Inc. (TWTR)
Everybody’s favorite activist short-selling firm took aim at Twitter yesterday. Citron Research said it was targeting TWTR stock due to increased risk of government privacy regulations. “Of all social media, they are most vulnerable to privacy regulation,” Citron said of Twitter.
The statement is somewhat odd, since everything on Twitter is in the public domain and easily searchable (save for your private direct messages). Citron also said that Twitter sells access to information in those direct messages (DMs), which the company denied.
“To be clear, our data licensing business does not sell DMs,” Twitter said in response.
Twitter stock options traders attempted to take the high road amid this flurry of concern over regulations. Volume came in at 295,000 contracts, or more than 2.5 times the stock’s daily average. Calls accounted for 53% of the day’s take.
Prior to the public outcry over Facebook, Inc.’s (NASDAQ:FB) folly with Cambridge Analytica, Twitter stock was on a tear higher. As a result, the stock’s April put/call OI ratio of 0.60 comes in at a very bullish reading. Look for puts to become more popular as this situation develops.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.