U.S. stock futures are mixed this morning. Tech has taken the lead on Wall Street once again, but the rest of the market isn’t following just yet. With political tensions running high in Washington, D.C., investors are unwilling to make too big a bet heading into the weekend.
As a result, Nasdaq-100 futures are leading the way with a 0.49% gain ahead of the open. Meanwhile, Dow Jones Industrial Average futures are down 0.18% and S&P 500 futures are off 0.05%.
Turning to the options pits, volume was above average and dominated by call activity. Specifically, about 20.6 million calls changed hands yesterday, compared to just 15.7 million puts. That rise in call volume was reflected on the CBOE, where the single-session equity put/call volume ratio plunged to 0.61. The 10-day moving average also ticked lower, resting at 0.64.
Options traders were clearly anticipating positive results ahead of last night’s wave of tech earnings. All three of the major tech giants reporting saw above average call volume and well above average overall options volume. Let’s take a closer look:
Microsoft Corporation (MSFT)
Microsoft has it head in the clouds, and that has made quite a difference for the legacy software firm. The company posted earnings of 95 cents per share on the quarter, beating expectations for 85 cents. Revenue rose to $26.8 billion, also topping the Street’s forecast for $25.8 billion.
Azure, Microsoft’s cloud unit, dominated the report by posting a 93% year-over-year gain in revenue. What’s more, Microsoft’s transition to digital cloud-based applications also showed growth. Microsoft’s Dynamics 365 customer and resource management software grew 65% and Office 365 Commercial sales gained 42%.
Ahead of the event, MSFT options traders were gearing up for positive results. Volume rose to over 320,000 contracts, nearly doubling Microsoft’s daily average. Calls were responsible for a whopping 72% of the day’s take.
Those bullish expectations are bleeding over into the May series as well. Currently, the May put/call open interest ratio rests at a lowly 0.41, with calls more than doubling puts.
Follow-through buying could help puts MSFT higher after earnings, and the shares could touch $100 before May expiration. Look for this ratio to trend lower as a result. But, be prepared to take profits on a market reversal or profit taking.
Intel Corporation (INTC)
For the quarter, Intel earned 87 cents per share, blowing past expectations for just 71 cents. Revenue rose to $16.0 billion, easily topping expectations for $15.31 billion.
Intel also lifted both its second quarter and full-year expectations. For the year, the company sees earnings of $3.66 to $4.04 per share on revenue of $66.5 billion to $68.5 billion. Analysts are expecting earnings of $3.57 per share on revenue of $65.11 billion.
Options traders rushed to get last minute calls in place yesterday. Volume jumped to 291,000 contracts, more than doubling Intel’s daily average. Calls gobbled up 63% of the day’s take.
What’s more, this optimism is prevalent in the May series as well. Like Microsoft, Intel’s May put/call OI ratio rests at 0.41, with calls doubling puts for the series.
Peak call OI is conservative, however, totaling 55,000 contracts at the in-the-money $52.50 strike. Look for profit taking in Intel’s options pits today, as the shares are up nearly 7% in premarket trading.
Amazon.com, Inc. (AMZN)
As I said back on April 6, only a concerted government effort can stock Amazon.com stock right now. The company once again asserted its dominance in the earnings confessional last night, with earnings more than doubling year-over-year.
Not only did Amazon top Wall Street’s earnings and revenue expectations, it hiked Prime subscription pricing by $20 a year and signed an NFL streaming deal for Thursday Night Football.
Amazon options traders we ready for the rally. Volume rose to over 215,000 contracts yesterday, with calls claiming 64% of the day’s take. That said, there is plenty of room on the bullish bandwagon. The May put/call OI ratio rests at a lofty 0.94, with puts in near parity with calls.
This may be due to the fact that it is easier, and cheaper, to sell deep out of the money put premium on AMZN stock than it is to buy calls. Either way, I would expect this ratio to move higher in the wake of Amazon’s quarterly report.
As of this writing, Joseph Hargett was long on Microsoft Corporation (MSFT).