After sliding into the close yesterday, U.S. stock futures traded down slightly ahead of the bell this morning. Futures on the Dow Jones Industrial Average were down 0.21% and S&P 500 futures were lower by 0.14%. Nasdaq-100 futures have shed 0.25%. For investors in the options trading pits, call volume outpaced put volume. Specifically, about 17.6 million calls traded versus 13.8 million puts.
On the CBOE, the single-session equity put/call volume ratio declined to 0.57. Meanwhile, the 10-day moving average fell slightly to 0.58.
Options activity saw plenty of excitement on Monday. Traders were particularly keen on these three heavy hitters: Boeing (NYSE:BA), General Electric (NYSE:GE) and Nvidia (NASDAQ:NVDA).
Let’s take a closer look:
Boeing (BA)
Recent news that Boeing won a $9.2 billion contract to build next-gen aircraft for the U.S. Air Force has sparked renewed interest in the Dow component. Yesterday’s high volume, 2.8% jump was the ultimate eyeball grabber. What’s particularly impressive is the rally delivered a long-awaited and much-anticipated price breakout.
BA stock has spent much of 2018 stuck in a trading range. The respite was well-deserved on account of the aerospace company’s massive gains from 2016 and 2017, but spectators have long wondered when the fireworks would return. With Monday’s resistance breach, I think it’s fair to say the bulls are back in business.
Keep Boeing stock on your radar as a top pick for bullish plays into any weakness.
On the options trading front, traders came after calls with a vengeance. Activity swelled to 202% of the average daily volume, with 97,636 total contracts traded. 69% of the trading came from call options alone.
The increased demand drove implied volatility higher on the day to 25% placing it at the 31st percentile of its one-year range. Premium sellers will be happy to note this is the highest level since late-July.
General Electric (GE)
Ailing shares of General Electric received a much-needed boost yesterday on news that its board ousted John Flannery as chairman and CEO. Although GE shares lost ground after the opening price jump, they still closed higher by 7.1%. This morning GE is receiving a further push in the form of an upgrade by RBC Capital to outperform. The stock is up 2% in pre-market trading.
The price action in GE has been utterly atrocious and in desperate need of a catalyst to arrest the decline. While Monday’s CEO change delivered a shot in the arm, it remains to be seen if the strength has staying power. Even with the price jump, the stock remains below its descending 200-day, 50-day and 20-day moving averages. Until we see more significant resistance levels breached, GE should be viewed as a broken stock.
On the options trading front, trading ballooned to over 360% of the average daily volume. Of the 788,692 contracts traded, the interest was split 50-50 between calls and puts. So it’s hard to declare a decisive victory to bulls or bears here.
Implied volatility ramped to 41% by day’s end lifting it to the 66% percentile of its one-year range. We are now just shy of a six-month high.
Nvidia (NVDA)
Nvidia pole vaulted to a new all-time closing high at $289.36 on Monday. The gains came on the heels of an already impressive rally into the weekend. This hypergrowth semiconductor stock is on the radar of momentum traders all over the Street right now.
As for options trading, speculators were gobbling up NVDA calls. They accounted for 70% of the 253,256 contracts that traded on Monday. The daily volume percentage jumped to 193%.
Despite the excitement, implied volatility only lifted modestly on the day. At 35%, we are now at the 39th percentile of the one-year range.
While the stock may need to take a breather after having run 8% in two days, any dips are buying opportunities here.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
