U.S. stock futures are trading slightly lower as investors return from the weekend. The calm open is a welcome development after the back-breaking volatility of last week. Bulls are hoping to build upon Friday’s rebound attempts.
Heading into the open, futures on the Dow Jones Industrial Average are down 0.12% and S&P 500 futures are lower by 0.12%. Nasdaq-100 futures have shed 0.24%.
In the options pits, put trading outpaced calls as overall volume levels remained well above average readings. Specifically, about 24 million calls and 26.6 million puts changed hands on the session.
However, those puts didn’t translate over to the CBOE, where the single-session equity put/call volume ratio retreated to 0.67. The 10-day moving average held edged higher to notch yet another five-month high at 0.68.
Options traders zeroed in on bank earnings. Bank of America (NYSE:BAC) experienced a topsy-turvy trading day after beating earnings expectations. JPMorgan Chase (NYSE:JPM) slid despite the bank’s solid earnings release. Elsewhere, Ford (NYSE:F) suffered on recent news of mass layoffs.
Let’s take a closer look:
Bank of America (BAC)
Bank stocks kicked off earnings season Friday with a salvo of reports from BAC, JPM, and Citigroup (NYSE:C). Releasing such key quarterly data in the midst of market turmoil increases the difficulty of identifying its impact.
Bank of America bested expectations by reporting earnings per share of 66 cents which represents a 43% increase from last year. Revenue came in at $22.8 billion and also topped estimates. Despite the seemingly rosy quarter, traders initially sold into the up gap that BAC scored Friday morning. After falling as much as 2.2%, buyers emerged and pushed BAC back into the green by day’s end.
On the options trading front, call trading ruled the day. Activity swelled to 242% of the average daily volume, with 838,199 total contracts traded. 76% of the trading came from call options alone.
With earnings now in the rearview mirror, implied volatility receded on the day, but not as much as usual. The general level of uncertainty pervading the broader market prevented a larger volatility crush. The implied volatility rank stands at 62%.
JPMorgan Chase (JPM)
Of the three big banks that reported Friday, the response in JPM stock was the most disappointing. While the other two finished in the green, JPM was unable to claw its way back from losing territory after its opening up gap was summarily rejected. JPM ended down 1%.
The losses come despite JPMorgan Chase & Co beating estimates and reporting $2.34 earnings per share on $27.8 billion in revenue.
Like the lion’s share of equities these days, JPM’s chart remains on shaky footing after last week’s price plunge. The $103 level marks the lower end of its year-long trading range. Consider it a “must defend” level for buyers or else much lower price zones will come into play.
On the options trading front, traders favored calls on the day. Activity swelled to 229% of the average daily volume, with 186,896 total contracts traded. Calls accounted for 57% of the day’s take.
The post-earnings volatility crush swept in and carried implied volatility down to 28%. However, it remains lofty by resting at the 62nd percentile of its one-year range.
Ford (F)
Ford shares have been brought low. Year-to-date the automaker’s shares are down 32%. The losses grew Friday as the ailing auto stock fell another 2% on heavy volume. The culprit for their troubles lies in large part with the tariffs recently implemented by President Donald Trump, which have cost the company an estimated $1 billion.
News that company layoffs will be part of the company’s reorganization efforts hit the wires last week and added further downside pressure to its decline. But a single silver lining exists among this year’s bloodbath. With its freshly slashed price tag, the dividend yield stands at a mouth-watering 6.9%. Dividend hunters and value seekers are sure to have F on their radar. Their buying appetite could be one of the factors to help stem the decline.
On the options trading front, traders came after puts with a vengeance. Activity swelled to 218% of the average daily volume, with 114,095 total contracts traded. 72% of the trading came from put options alone.
Implied volatility sky high for the stock at 44%. It currently rests at the 91st percentile of its one-year range.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.
