Wednesday’s Vital Data: Apple, Twitter and Advanced Micro Devices

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U.S. stock futures are mixed this morning. Tech stocks are trading broadly higher following a solid quarterly earnings report from Apple (NASDAQ:AAPL). However, the rest of the market is feeling pressure from an escalation in rhetoric in the U.S.’s trade war.

stock market todaySpecifically, President Donald Trump is considering boosting tariffs on some Chinese imports. Trump originally proposed a 10% tariffs on an additional $200 billion in Chinese imports, but the levies may be boosted as high as 25%.

As a result, futures are divided heading into the open. At last check, Nasdaq-100 futures are up 0.26% due to Apple’s premarket strength. Meanwhile, S&P 500 futures were up 0.03% and Dow Jones Industrial Average futures were off 0.11%.

In options activity, the last day of July passed with a little less fanfare than the days preceding it. Only about 17.8 million calls and 14.7 million puts changed hands on the session — down sharply from Monday’s highest volume of the year. Over on the CBOE, the single-session equity put/call volume ratio rose to 0.69. The 10-day moving average held at 0.63.

Options traders focused on tech once again, which is natural given that Apple could be headed for record market capitalization today. Outside of Apple, Twitter (NYSE:TWTR) is back on the bullish scene after Normura upgraded the shares and sparked a call option flurry.

Finally, Advanced Micro Devices (NASDAQ:AMD) was also call heavy despite plunging more than 5% on a major shareholder’s disclosure.

Let’s take a closer look:

Tuesday’s Vital Options Data: Apple, Twitter and Advanced Micro Devices

Apple (AAPL)

The talk on the Street right now is AAPL stock. After the close last night, Apple reported better-than-expected earnings of $2.34 per share on revenue of $53.3 billion. Analysts were anticipating earnings of $2.16 per share on sales of $52.3 billion.

What’s more, Apple also said it expected third-quarter revenue of $60 billion to $62 billion, ahead of the consensus target for  $59.5 billion. Apple stock is up more than 4% premarket, and could be headed for a record valuation of $1 trillion in today’s trading.

However, options traders were a bit wary ahead of last night’s report. Volume rose to 823,000 contracts, nearly tripling Apple’s daily activity. Calls only accounted for 49% of this volume, coming in well below AAPL’s average.

Quite a bit of this negativity could have been directed at the August series. Currently, the August put/call open interest ratio comes in at 1.4, with puts clearly outpacing calls.

That said, peak put OI totals about 70,000 contracts at the deep out-of-the-money August $175 strike. In short, these traders may have sold $175 puts to collect premium ahead of last night’s quarterly report, as implied volatility was only pricing in a post earnings move of about 5%.

Twitter (TWTR)

After plunging more than 26% following it’s second-quarter earnings report, TWTR stock is now “appropriately reset” according to Nomura analyst Markt Kelley. Kelley held his price target at $31 and lifted his rating from “reduce” to “neutral.”

“We also believe there is still some downside risk to [the first half of 2019] estimates (though they have come off a bit), and we expect the debate around privacy and platform health investments will lead to a discussion around the long-term margin profile management has outlined,” Kelley said.

Options traders focused more on the “upgraded” part of the announcement, taking the bump as a bullish sign and rallying behind TWTR call options. Volume on Tuesday jumped to 212,000 contracts, with calls snapping up 66% of the day’s take.

Overall, TWTR options traders have a short-term bullish bias on the shares. Specifically, the August put/call OI ratio rests at 0.58, with calls nearly doubling puts for the series. That said, some of this call OI may have been open for a while. For instance, there are more than 12,000 calls open at TWTR’s August $45 strike. Twitter shares haven’t traded anywhere near $45 since earnings.

Advanced Micro Devices (AMD)

AMD stock’s meteoric run hit a roadblock yesterday. The shares dropped more than 5.6% after Mubadala Investment (AMD’s second-largest shareholder) disclosed the sale of 22 million shares for $427.24 million. The sale implied a price of $19.42 for AMD stock, which is where AMD closed on Monday.

AMD options traders responded with calls, though whether this activity was profit taking or the initiation of new positions is yet unclear. Volume rose to 408,000 contracts, or nearly double AMD’s daily average. Calls made up a sizeable 72% of yesterday’s take.

As for short-term August contracts, the put/call OI ratio comes in at 0.57, leaving calls firmly in control. Peak August call OI totals about 30,000 at the in-the-money $18 strike, however, indicating that AMD bulls are not betting the farm on the shares just yet.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2018/08/wednesdays-vital-data-apple-twitter-and-advanced-micro-devices/.

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