U.S. stock futures are trending broadly higher this week, as Wall Street looks to put a positive finish on a wretched week. The financial sector is driving this morning’s run higher. Several banking firms said they would return capital to shareholders after getting past the Fed’s recent round of stress tests.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.44%. Meanwhile, S&P 500 futures have added 0.34% and Nasdaq-100 futures have risen 0.41%.
In options activity, volume remained tame, but puts gained the upper hand. Overall, about 17.2 million calls and 17.5 million puts changed hands yesterday. On the CBOE, the single-session equity put/call volume slipped to 0.65. The 10-day moving average rose to 0.59 — nearly a one-month high.
Options traders are gearing up for Tesla’s (NASDAQ:TSLA) official update on Model 3 production next week. Meanwhile, Amazon (NASDAQ:AMZN) options rallied after the company paid $1 billion for small online pharmacy PillPack. Finally, Netflix (NASDAQ:NFLX) received at least its second bullish research note of the week, this time from Macquarie Research.
Let’s take a closer look:
Tesla (TSLA)
On Tuesday next week, Tesla is scheduled to provide investors with an update on Model 3 production. The company’s stated goal is 5,000 vehicles per week, but a recent interview with workers indicates that’s not going to happen.
“Paint can’t handle the load right now because they have the Model S and X that they normally do and now they have all these Model 3s,” a worker told Reuters. “The paint department just can’t keep up.”
TSLA investors largely ignored the warning, however, sending the stock nearly 1.4% higher yesterday. Options traders were also bullish. Volume rose to 201,000 contracts, with calls claiming 57% of the day’s take.
Despite the recent attention to calls, short-term traders remain stubbornly bearish. For instance, the July put/call open interest ratio comes in at 1.24, indicating that puts are the clear favorite at the moment. Next week will tell if these puts are going to get burned, or if TSLA bears will be walking to the bank.
Amazon (AMZN)
Amazon once again rattled the pharmacy market, announcing yesterday that it was buying online purveyor of pills PillPack for $1 billion. PillPack supplies pre-sorted prescription drugs to people who take multiple medications — a fast growing market among the Baby Boomer generation. The acquisition gives Amazon an in to the $450 billion prescription drug market.
AMZN options traders cheered the acquisition. Volume came in at 166,000 contracts, with calls making up 57% of the day’s take. However, there is still some lingering negativity in Amazon’s options backdrop.
Specifically, the July put/call OI ratio comes in at 0.87, meaning that puts are on the verge of overcoming calls in the front-month series. That said, AMZN is trading near all-time highs, and a degree of pessimism here is healthy for the shares.
Netflix (NFLX)
For at least the second time this week, analysts have issued a bullish research note on Netflix. On Tuesday, Imperial Capital initiated NFLX stock at “outperform” with a $503 price target. Then, yesterday, Macquarie Research lifted its NFLX price target to $430 from $336 and reiterated its “outperform” rating. Macquarie cited “uplift” in subscriptions as people upgrade their service to match their high-end televisions.
NFLX, too, is trading near all-time highs, leaving options traders reluctant to chase the shares much higher. That reluctance was evident in yesterday’s activity. Volume rose to about 180,000 contracts, and calls only managed 55% of the day’s take.
This caution is also prevalent throughout NFLX’s July options series. The put/call ratio for July comes in at 0.92, with puts on the verge of parity with calls. The $400 level is coming up quick, and could be breached today. If NFLX holds support in the region, it could shift the stock’s options sentiment outlook.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.
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