U.S. stock futures are mixed heading into the open. Currently, Dow Jones futures are trading higher by the grace of Caterpillar (NYSE:CAT), which posted better-than-expected earnings this morning. The rest of the market is fighting the weight of geopolitical tensions and last week’s FAANG earnings scare from Facebook (NASDAQ:FB).
There will also be a fair degree of volatility today and tomorrow as traders position themselves ahead of the end of the month. For July, the Dow Jones Industrial Averageis up 4.9% as of Friday’s close. Meanwhile, the S&P 500 Index is up 3.7% on the month and the Nasdaq Composite has gained 3%.
Turning to futures this morning, Dow futures are up 0.12% due to a 3.5% surge in CAT stock. Meanwhile, S&P futures are up 0.02% and Nasdaq-100 futures have lost 0.04%.
In options activity, volume surged on Friday as options traders prepared to the end of July. About 23.5 million calls and 20.5 million puts changed hands on the session — putting volume at its highest level since January. Over on the CBOE, the single-session equity put/call volume ratio rose to 0.67. The 10-day moving average ticked higher to 0.63.
Options traders focused on Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD) as the war for market share heated up during the last quarter. Meanwhile, Weatherford International (NYSE:WFT) was hammered by puts despite stronger-than-expected earnings.
Let’s take a closer look:
Intel (INTC)
All in all, Intel reported pretty solid second-quarter results. Earnings and revenue beat expectations and Intel guided higher for the fully year. However, data-center revenue came in at $5.5 billion, missing expectations for $5.61 billion and ramping up speculation that AMD was stealing critical market share.
Adding to Intel’s woes was a statement by acting CEO Bob Swan that the company has no time table for selecting a new CEO after the unexpected departure of CEO Brian Krzanich back in June.
As a result, INTC stock plunged more than 8.5% on Friday, driving a mixed bag in the options pits. Specifically, volume swelled to 398,000 contracts or more than five times INTC’s daily average. Calls still led the way, garnering 59% of the day’s take.
That call activity may have been due to the closure of existing positions, though. In fact, the August put/call open interest ratio rose last week from 0.57 to 0.59 this morning. In other words, puts are now being added at a faster rate than calls among front-month options. This could mean additional downside for INTC if bearish sentiment gains traction.
Advanced Micro Devices (AMD)
AMD is enjoying the limelight right now. The stock received another boost on Friday after Intel’s quarterly earnings report hinted that AMD was gaining ground in the data center market. As a result, AMD stock set another multi-year closing high — putting the shares at their loftiest point in more than a decade.
Naturally, Friday’s options volume on AMD was overall bullish. Volume jumped to over 714,000 contracts, nearly quadrupling AMD’s daily average. Calls gobbled up 67% of the day’s take.
Looking out to August, investors are growing even more bullish on AMD. Currently, the August put/call OI ratio for AMD comes in at 0.51, with calls practically doubling puts in the front-month. Surprisingly, all of the major August call strikes, like the $16 and $18 calls, are trading firmly in the money.
There is little in the way of overhead open interest for AMD at this point. As a result, there is little potential for options-related resistance for AMD, clearing the path higher.
Weatherford International (WFT)
Here we go again with Weatherford put activity. Regular readers may remember back in May when WFT stock was targeted twice by massive put traders. Once at the June $3 put strike on May 3, and again about a week later at the June $3.50 put strike.
This time, traders are once again targeting the WFT $3.50 put strike, but in the September series. Some 218,000 contracts traded on WFT on Friday, with puts claiming 96% of that activity.
Those puts crossed almost exclusively on the Sep $3.50 strike. And, according to Trade-Alert.com, those contracts crossed at the bid — i.e. they were sold to open. Further confirming the opening of a new put sell position, open interest at the September $3.50 put was only 12 contracts as of Friday morning. Now there are more than 250,000 contracts open.
As of this writing, Joseph Hargett was long on AMD stock.
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