U.S. stock futures are treading water just above break even this morning. Wall Street is in a bit of a holding pattern as it awaits key earnings from a flood of financial banking giants.
JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C) have both already reported earnings this morning.
Heading into the open, futures on the Dow Jones Industrial Average have gained 0.02%. Meanwhile, S&P 500 futures are down 0.04% and Nasdaq-100 futures have added 0.01%.
In options activity, volume was pretty middle-of-the-road on Thursday. Overall, about 17.8 million calls and 13.3 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume slipped to 0.56, dragging the 10-day moving average lower to 0.62.
Options traders refocused on tech yesterday. Analysts price target increases at Amazon.com (NASDAQ:AMZN) and Twitter (NYSE:TWTR) naturally attracted call options activity. However, calls were also popular on Broadcom (NASDAQ:AVGO), which was slammed for shelling out $19 billion to acquire CA, Inc. (NASDAQ:CA).
Let’s take a closer look:
Amazon.com (AMZN)
AMZN stock drew a flurry of call option activity yesterday following a bullish note from analysts at Canaccord Genuity. Canaccord boosted its price target on AMZN stock to $2,000 from $1,800, citing strong fundamentals and continued e-commerce growth of roughly 30%.
“We think fundamentals remain as strong as ever as e-commerce business continues to grow nearly 30% ex-Whole Foods, and AWS remains the market leader, accelerating growth to almost 50% last quarter,” Canaccord said in a note to clients.
Options traders agreed, as calls made up 61% of the more than 316,000 contracts that traded on AMZN stock. The activity was more than double Amazon’s daily average, putting a brisk edge on yesterday’s bullishness.
Weekly July 27 options were among the most popular, as Amazon officially set July 26 as the date for its second-quarter earnings report. Currently, the weekly July 27 put/call open interest ratio is quite bearish, arriving at 1.51. This ratio should come down sharply as earnings draw nearer.
Broadcom (AVGO)
Yesterday, Broadcom announced it was buying software firm CA Inc. for nearly $19 billion. As a result, investors cut roughly $19 billion from Broadcom’s market cap.
AVGO stock plunged nearly 14% following the news of the acquisition, which came after President Donald Trump killed AVGO’s bid to acquire Qualcomm Inc. (NASDAQ:QCOM). Analysts questioned the deal, which is said to cut Broadcom’s top line growth to 3% from 5%.
Options traders, however, may have felt the plunge went too far. Volume on AVGO stock surged to 175,000 contracts, or more than 17 times AVGO’s daily average. Calls snapped up 64% of the day’s take — not a reaction you usually see in a stock dropping nearly 14%.
A close looks reveals that AVGO options traders are mixed over the short-term. The July put/call OI ratios comes in at 0.78, with puts nearly as popular as calls in the front-month. Still, call OI rose notably on the $210 and $220 July call strikes, hinting at speculation for a rebound.
Twitter (TWTR)
The purge has happened at Twitter. In the past two months, the company has terminated more than 70 million accounts. That’s even more impressive when you consider that Twitter had about 336 million monthly active users in the first quarter.
TWTR stock plunged on the news on Monday, but analysts have since come out to defend the shares. Most recently, Goldman Sachs reiterated its “buy” rating and lifted its price target to $55 from $40. Goldman told clients that the purge of inactive and spammy accounts is healthy for Twitter and should encourage advertisers to spend more.
Options traders have also taken a positive stance on TWTR stock. Volume yesterday rose to 153,000 contracts, and calls made up 68% of that activity. Short-term TWTR options activity remains a bit cautious, however.
The July put/call OI raito rests at a contentious reading of 0.73. Neither calls nor puts are firmly in control at this point, indicating that speculators are bracing for a bit more volatility.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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