Tuesday’s Vital Data: Bank of America, Canopy Growth Corp and Morgan Stanley

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Editor’s Note: Vital Data is taking a hiatus Wednesday through Friday and will return on Monday, Oct. 22.

U.S. stock futures are trading broadly higher this morning on the heels of robust quarterly earnings from the likes of Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS) and Johnson & Johnson (NYSE:JNJ).

Tuesday's Vital Data: Bank of America, Canopy Growth Corp and Morgan StanleyAhead of the bell, futures on the Dow Jones Industrial Average are up 0.75% and S&P 500 futures are higher by 0.66%. Nasdaq-100 futures have added 0.96%.

In the options pits, yesterday’s calm trading session spilled into derivatives trading driving overall volume levels back down toward average levels. Specifically, about 17.7 million calls and 15.6 million puts changed hands on the session.

The easing of fear was also felt at the CBOE, where the single-session equity put/call volume ratio fell back to 0.61 — a one-week low. The 10-day moving average held its ground at a six-month high at 0.66.

Options traders continued to favor bank stocks surrounding a slate of earnings releases. Bank of America (NYSE:BAC) saw continued interest in the wake of Friday’s earnings report. Morgan Stanley (NYSE:MS) was popular ahead of this morning’s earnings. Finally, Canopy Growth Corp (NYSE:CGC) saw call volume ramp on acquisition news.

Let’s take a closer look:

Bank of America (BAC)

As mentioned yesterday, BAC earnings fared well with a 32% increase versus last year. Nonetheless, Wall Street was swift to greet the up-gap with a flurry of sell orders. The downside pressure persisted Monday lopping another 1.9% off its share price.

With BAC stock fast approaching a new 52-week low, shareholders are hoping that this morning’s positive earnings beat out of Goldman and Morgan Stanley will help to buoy the sector.

Chartists will note that BAC has a major support zone in the $28 area, so if there were ever a time for buyers to defend their turf, it’s now.

On the options trading front, calls were once again popular. Activity remained elevated at 229% of the average daily volume, with 839,019 total contracts traded. 85% of the trading came from call options.

Implied volatility continued its post-earnings retreat by falling to the 51st percentile of its one-year range.

Morgan Stanley (MS)

Morgan Stanley joined BAC among atop the options activity leaderboard yesterday. The excitement was due, no doubt, to traders jockeying for positions ahead of this morning’s earnings release. Those who bet bullishly will be happy to know MS is currently set to gap higher by around 4%. It’s trading near $44.67 pre-market as of 8:30 AM EST.

MS bested Wall Street’s estimates by reporting quarterly earnings of $1.17 per share. Revenue also arrived above expectations.

On the options trading front, puts outpaced calls. Activity grew to 209% of the average daily volume, with 80,202 total contracts traded. Puts won the popularity contest accounting for 55% of the day’s take.

Implied volatility entered the event at 30% which is the 72nd percentile of its one-year range. With this morning’s price jump, I expect a volatility beatdown to ensue.

Canopy Growth Corp (CGC)

Marijuana stocks lit up Monday on news that Canadian-based Canopy Growth Corp was acquiring Ebbu, a Colorado hemp research company. Traders took the purchase as a positive omen that could aid CGC as it looks to expand its product line. Pot stocks have been some of the largest winners this year and yesterday’s news only served to re-ignite interest.

From a charting perspective, CGC looks healthy as a horse. Monday’s 14% moonshot created a breakout from a two-month basing pattern.

On the options trading front, calls dominated the day. Activity grew to 223% of the average daily volume, with 89,312 total contracts traded. Calls accounted for 78% of the total as traders took to the options market to speculate on further upside.

Implied volatility lifted on the day to 98% showing options continue to price-in extreme moves for the foreseeable future in CGC.

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.

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Article printed from InvestorPlace Media, https://investorplace.com/2018/10/tuesdays-vital-data-bank-of-america-canopy-growth-corp-and-morgan-stanley/.

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