U.S. stock futures are trading flat ahead of the bell Friday. The relative calm is a welcome change after yesterday’s swoon. Many of the indexes put up their largest losses in months as sellers scored a rare victory. This morning’s jobs report could have an impact on today’s trading session. Unemployment dropped, but wage growth slowed slightly.
This week’s breakout in the 10-year yield is one of the hobgoblins worrying investors right now. If inflation ramps quicker than expected then Jerome Powell and Company at the Fed may be forced to lift interest rates faster than expected.
Against this backdrop futures on the Dow Jones Industrial Average are down 0.11% and S&P 500 futures are lower by 0.12%. Nasdaq-100 futures have shed 0.27%.
In the options pits, put volume spiked sharply yesterday boosting overall volume to well above average. Specifically, about 23.6 million calls and 24.2 million puts changed hands on the session.
Not surprisingly we saw a huge change over at the CBOE, where the single-session equity put/call volume ratio ripped to 0.72 — a one month high. The 10-day moving average ticked higher to 0.59.
Options traders were particularly active in these three names: Amazon (NASDAQ:AMZN), Snapchat (NASDAQ:SNAP) and Nvidia (NASDAQ:NVDA)
Let’s take a closer look:
Amazon (AMZN)
The big news this week for Amazon was the announcement of an increase in minimum wage to $15 per hour. But while one hand give the other taketh away. Simultaneously, the company is doing away with incentives like monthly bonuses and stock option awards. Nonetheless, in an email to CNBC, an Amazon’s spokesperson said, “The significant increase in hourly cash wages more than compensates for the phase out of incentive pay and [restrictive stock units].”
Thus far, the news isn’t being cheered by investors. AMZN has fallen three days in a row on heavy volume. Yesterday’s 2% drubbing ushered the stock below its rising 50-day moving average for the first time since April. Chart watchers will note the next minor support level looms at $1,870, so as long as we remain above it, I would remain bullish.
On the options front, things were hopping. Activity ramped to 156% of the average daily volume, with 352,148 total contracts traded. Despite the downturn traders still favored calls. They accounted for 60% of the total.
Increased demand for derivatives lifted implied volatility to a six-month high. At 40%, implied volatility now sits at the 78th percentile of its one-year range. Option premiums are officially ripe for the selling.
Snapchat (SNAP)
Serial disappointer Snapchat is having a rough week. And, I suppose, we could substitute “week” in the prior sentence with month, year or even life. Yesterday’s 5% drubbing carried SNAP to a new all-time low before climbing back slightly to close at $7.80. This time the culprit for sellers’ aggression was negative comments from Evercore ISI analyst, Anthony DiClemente. Citing increased competition and a lack of positive catalysts, DiClemente lowered his target price and reiterated an underperform rating.
The price action for SNAP has been terrible. Year-to-date shares are down 47% falling from over $14 to $7.80. The trend and momentum both point to lower prices. That said, the stock is quite oversold, so this is far from a low-risk entry for new bearish trades.
On the options front, yesterday’s poor news drove demand for options higher. The implied volatility is now 77% placing it at the 72nd percentile of its one-year range.
Activity ballooned to 151% of the average daily volume, with 178,533 total contracts traded. 61% of the trading focused on puts as jittery investors sought protection from further declines.
Nvidia (NVDA)
Nvidia shares slumped yesterday as tech stocks bore the brunt of the selloff. The bout of profit-taking came after the popular chip stock tagged a new all-time high at $292.76. From a technical analysis perspective, NVDA boasts the best looking price chart of today’s trio — even better than AMZN. Volume patterns remain bullish suggesting this dip is a buying opportunity.
On the options trading front, participants remained focus on calls despite the bearish tone. Activity swelled to 139% of the average daily volume, with 187,416 total contracts traded. And 60% of the trading came from call options.
Implied volatility rallied on the day lifting the IV Rank to the 47th percentile of its one-year range.
As of this writing, Tyler Craig held bullish positions in NVDA. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
