Wednesday’s Vital Data: Tesla, Micron Technology and Electronic Arts

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U.S. stock futures are trading lower, setting the major market indexes up for a weak open. Politics is the driver this morning. Former Donald Trump campaign chairman Paul Manafort was convicted on eight federal charges yesterday, including tax fraud. Additionally, President Trump’s former lawyer Michael Cohen said he violated campaign-finance law at the president’s direction.

Wednesday’s Vital Data: Tesla, Micron Technology and Electronic ArtsOutside of politics, economic data will be in focus. July existing-home sales data will hit after the open, while minutes from the Federal Reserve’s last meeting will arrive this afternoon.

Against this rocky backdrop, futures on the Dow Jones Industrial Average are down 0.21%. Furthermore, S&P 500 futures are off 0.28% and Nasdaq-100 futures are down 0.05%.

In the options pits, volume rebounded from Monday’s weakness and returned to normal on Tuesday. Calls were in control, with volume arriving at 18.4 million contracts, compared to 13.1 million puts. Despite the added call volume, the CBOE single-session equity put/call volume ratio rose to 0.58. The 10-day moving average, however, ticked lower to 0.63.

Options traders continued to target Tesla (NASDAQ:TSLA) amid the ongoing saga of CEO Elon Musk’s bid to take the company private. Meanwhile, Micron (NASDAQ:MU) is seeing building call volume as the shares challenge $50. Electronic Arts (NASDAQ:EA) call activity spiked despite bearish comments from Cowen.

Let’s take a closer look:

Wednesday’s Vital Options Data: Tesla, Micron Technology and Electronic Arts

Tesla (TSLA)

Morgan Stanley increased speculation on the veracity of Elon Musk’s “going private” tweet last week. The brokerage firm quietly dropped coverage on TSLA stock yesterday. The move sparked rumors the company was advising Tesla on it’s plan to take the company private. Morgan Stanley has not responded to questions on the matter.

Last week, Goldman Sachs dropped TSLA coverage before saying that it was advising Musk and Tesla’s board on taking the company private.

TSLA stock jumped more than 4% on the news, but it wasn’t enough to spur interest from options bulls. Volume came in at just below 254,000 contracts on the day, just below average for TSLA. Puts edged out calls with 51% of the day’s take.

Still, the added call volume in recent days is having an impact on TSLA’s September put/call open interest ratio. This reading has fallen from 2.51 on Monday to today’s perch at 2.39. The ratio is still heavily bearish, but it would appear that either bulls are gaining a tentative momentum or bears are taking profits while they can.

Micron (MU)

MU stock extended its three-day winning streak yesterday and is now up nearly 8% since Friday morning. The shares have gained momentum amid a broader rebound in semiconductor stocks. MU is now poised to reclaim key technical support at $50, a level is plunged below a week ago today. The area is also home to Micron’s 200-day moving average.

The psychological impact of retaking both $50 and the 200-day trendline had MU call options traders out in force yesterday. Volume spiked to 291,000 contracts, with calls claiming 73% of the day’s take.

That said, the September put/call OI ratio has risen in the past week from 0.6 last Thursday to 0.63 today. The past week’s choppy trade is likely responsible for the rise in put preference, but this reading should now rise going forward if MU retakes $50 today.

Electronic Arts (EA)

EA’s latest entry in its triple-A Battlefield series may be in trouble. According to analysts at ratings firm Cowen,  preorders for Battlefield V are trailing 85% below those of Activision Blizzard’s (NASDAQ:ATVI) competing shooter entry Call of Duty: Black Ops 4. The data led Cowen to speculate that EA may not be able to live up to its 2019 guidance.

EA stock slipped about 0.74% on the news, but that didn’t slow down call traders … or rather one call trader. Volume yesterday jumped to over 175,000 contracts on EA, and calls claimed a whopping 95% of the day’s take. Digging a bit deeper with Trade-Alert.com, we see why.

At about 2:42 p.m. Eastern yesterday, a trader entered what appears to be a January 2019 $130/$135 bull call spread with 75,231 contracts per leg. That’s a total of 150,462 call contracts all together. The spread traded at the ask of $3.50, or $350 per contract, totaling a whopping $52.6 million. The maximum profit is $1.50, or $150 per contract — a total of about $22.6 million.

Despite the large numbers, this EA trade doesn’t seem very efficient for an options trade. In other words, there’s likely more going on behind the scenes, like another leg or side to this trade.

As of this writing, Joseph Hargett was long on Micron Technology (MU).


Article printed from InvestorPlace Media, https://investorplace.com/2018/08/wednesdays-vital-data-tesla-micron-technology-and-electronic-arts/.

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