U.S. stock futures are trading lower this morning. Wall Street’s good mood was ruined over the weekend by a resurgence of trade war fears.
On Friday, reports surfaced that President Donald Trump had instructed the administration to carry out $200 billion in tariffs against Chinese products. The move comes even as the White House invited Chinese officials to resume trade talks.
China, however, said it might decline the trade talks offer if Trump carries out his trade war threats. “China is not going to negotiate with a gun pointed to its head,” a senior Chinese official said. What’s more, some Chinese officials are even calling for restrictions on sales of materials, equipment and other parts key to U.S. manufacturers’ supply chains.
Against this backdrop, futures on the Dow Jones Industrial Average are down 0.07%, with S&P 500 futures slipping 0.10%. Nasdaq-100 futures are down 0.22%.
In the options pits, volume remained slightly above average on Friday. Overall, about 19.8 million calls and 14.9 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio rebounded from a three-month low to hit 0.58. The 10-day moving average, meanwhile, held its ground at 0.61.
Options traders ramped up speculation on Amazon.com, Inc. (NASDAQ:AMZN), while Tilray, Inc. (NASDAQ:TLRY) was shaken by U.S. border concerns and Tesla Inc. (NASDAQ:TSLA) surged 12% amid a rare scandal-free week.
Let’s take a closer look at the options pits amid a week rocked by trade war sabre rattling:
Amazon.com, Inc. (AMZN)
Amazon stock retreated last week. Profit-taking set in after the shares briefly topped $2,000 and hit a $1 trillion valuation. AMZN has now pulled back nearly 2% from its record peak, leading to heavy speculation in the options pits.
Also driving speculation is the brewing drama over where Amazon will establish its second headquarters. Washington, D.C. is among the leading candidates, creating an interesting mix of speculation given CEO Jeff Bezos’ contentious relationship with both sides of the political aisle.
Amazon stock options traders are largely divided on the stock’s prospects right now. Volume on Friday came in at 294,000 contracts, or about 1.3 times the stock’s daily average. Calls edged out puts by claiming 55% of Friday’s activity.
Overall, the October put/call open interest ratio reflects this trepidation on AMZN stock. Currently, the ratio rests at 0.89, and has risen in the past week. In other words, AMZN options traders are either betting on a continued decline or taking out put protection amid the stock’s retreat.
Considering that the holiday shopping season is just around the corner, the latter option appears more likely.
Tesla Inc. (TSLA)
It’s amazing what a controversy-free week can do for a stock. Tesla CEO Elon Musk was barely in the headlines at all last week, unlike the month prior. The infamous CEO enjoyed a faux pas-free week, and TSLA stock rose roughly 12% as a result.
However, the reprieve didn’t last long. Over the weekend, Musk opined that Tesla’s problems have shifted from production to delivery logistics. “Sorry, we’ve gone from production hell to delivery logistics hell, but this problem is far more tractable. We’re making rapid progress. Should be solved shortly,” Musk said in a tweet.
Additionally, fire broke out in the Gigafactory in Nevada on Saturday. Production was halted, but no injuries were reported. Production resumed early Sunday, but there has been no word on the extent of the damage or how it might affect battery output.
Heading into the weekend, it appeared that sentiment was on the mend for TSLA stock. Calls claimed 57% of the more than 265,000 contracts traded on TSLA on Friday. That said, there is still a wealth of negativity levied against TSLA in the options pits.
Specifically, the October put/call OI ratio rests at 2.29, with puts more than doubling calls in the series. Most notable, are the 34,000 puts open at the deep-out-of-the-money October $50 strike and 13,000 puts open at the October $25 strike.
Tilray, Inc. (TLRY)
Marijuana stocks nearly went up in smoke on Friday following comments from Todd Owen, executive assistant commissioner for the Office of Field Operations with the U.S. Customs and Border Protection agency.
Owen told Politico that Canadian cannabis industry workers could be banned from the U.S. for life. Even marijuana stock investors could be prohibited from visiting the U.S., under a strict interpretation of section 212 of the U.S. Immigration and Nationality Act.
The news spooked marijuana stock investors and sent TLRY stock plunging nearly 9%. Options traders flooded the shares on the news, though activity was soundly divided between bullish and bearish.
More than 205,000 contracts traded on TLRY on Friday, arriving at more than five times the stock’s daily average. Calls eked out a mere 51% of the day’s take.
As a result, the October put/call OI ratio now stands at 1.09, with puts gaining a slight edge over calls in the new front-month series. Look for this reading to turn lower once again as TLRY recovers from what appears to be a knee-jerk reaction lower.
As of this writing, Joseph Hargett held no position in any of the aforementioned equities.
