U.S. stock futures are trading higher this morning. The Dow Jones Industrial Average is on track for it’s sixth straight win — it’s longest win streak since February. Inflation is the talk on the Street this morning. Key inflationary data in the form of the April consumer price index (CPI) arrives today, followed by weekly jobless claims.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.11%, S&P 500 futures have added 0.20% and Nasdaq-100 futures have gained 0.19%.
Turning to the options pits, volume rebounded sharply on Wednesday. About 21.3 million calls and 16.6 million puts crossed the tape. On the CBOE, the single-session equity put/call volume ratio dropped to 0.58. The 10-day moving average, meanwhile, fell to 0.62 — it’s lowest reading since March 20.
Options traders were taken with Facebook, Inc. (NASDAQ:FB) after the company said it was investigating blockchain technology. Meanwhile, Advanced Micro Devices, Inc. (NASDAQ:AMD) volume surged ahead of competitor Nvidia Corporation’s (NASDAQ:NVDA) earnings report. Finally, Weatherford International Plc (NYSE:WFT) was once again flooded with put volume amid no news.
Let’s take a closer look:
Facebook Inc. (FB)
Facebook might be diving into blockchain technology. According to a post yesterday by Facebook Messenger head David Marcus, the company will begin studying how to use blockchain in developing new products. Marcus is also on the board of cryptocurrency exchange Coinbase.
“I’m setting up a small group to explore how to best leverage blockchain across Facebook, starting from scratch,” Marcus said on his personal Facebook page.
The news drove FB options traders toward calls on Wednesday. Volume topped 387,000, easily passing Facebook’s daily average activity. Calls made up 69% of the day’s take — also above average.
Facebook has taken considerable flak over the Cambridge Analytica debacle, but options traders have largely kept the faith. For instance, the June put/call open interest ratio still rests at a moderately low reading of 0.7.
Furthermore, there is heavy call OI at the out-of-the-money June $210 call strike, totaling more than 42,000 contracts. Look for this call activity to heat up if FB gets serious about blockchain.
Advanced Micro Devices, Inc. (AMD)
AMD attracted heavy options activity yesterday as well, but for nothing the company itself did. Rival Nvidia is slated to report earnings after the close tonight, and investors will be looking for information on any impact that cryptocurrency mining has on the GPU maker’s results. Positive or negative information on crypto-mining demand could have a ripple effect on AMD as well as NVDA.
As for AMD, options traders were mixed ahead of tonight’s report from NVDA. Volume rose to 223,000 contracts, just shy of levels seen before AMD’s own quarterly report. Calls made up only about 57% of the day’s take — a sign of caution from speculative investors.
Turning to the weekly May 11 series, AMD options traders appear to be treating NVDA’s report as a major event. Open interest in the weekly series is considerable, with implied volatility pricing in a potential move of nearly 3%. With a put/call OI ratio of 0.61, AMD traders are leaning bullish ahead of NVDA’s quarterly report, hoping for tailwinds to lift the shares.
Weatherford International Plc (WFT)
Anyone remember the last time we checked in on Weatherford? Back on May 3, WFT popped up on my daily top ten most active options list due to a massive block of 200,000 June $3 puts. The block totaled an outlay of $4 million and represented 20 million EFT shares, or 2% of WFT’s total float.
Yesterday, WFT saw similar activity, pushing the stock once again onto the top ten most active’s list. According to Trade-Alert.com, a block of 100,000 June $3 puts changed hands yesterday for 8 cents, or $8 per contract. Open interest at the strike declined by 100,000 contracts, indicating these positions were closed.
At the same time, a block of 100,000 June $3.5 puts traded for 23 cents, or $23 per contract. Open interest at this strike rose by 100,000 contracts.
Given that WFT stock jumped 3.06% yesterday to trade above $3, it would appear that a trader bought back 100,000 sold June $3 puts and rolled them into a June $3.5 put sell position.
Assuming this was indeed a roll up of a put sell position, the net credit was $1.5 million. But the trader is now on the hook for 10 million shares of WFT stock at $3.50 each if the shares don’t close above $3.50 by the time June options expire.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.