Wednesday’s Vital Data: eBay, Starbucks and Walmart

Advertisement

U.S. stock futures are sliding after yesterday’s disappointing bounce attempt. The weakness comes despite Tuesday’s mild retreat in bond yields which eased the rising rate pressures that have been worrying investors. Heading into the open, futures on the Dow Jones Industrial Average are down 0.31% and S&P 500 futures are lower by 0.37%. Nasdaq-100 futures have lost 0.63%.

In the options pits, the decline in market volatility helped push trading activity back down toward average levels. Specifically, about 17.8 million calls and 15.2 million puts changed hands on the session.

As the mad dash for puts has subsided, so too has the single-session equity put/call volume ratio at the CBOE. It closed the day at 0.62. Meanwhile, the 10-day moving average is still being bolstered by last week’s spike in the ratio — it settled at 0.63.

Options activity ballooned in these three names. eBay (NASDAQ:EBAY) was in the spotlight on activist interest. Starbucks (NASDAQ:SBUX) benefited from news that Bill Ackman of Pershing Square Capital recently purchased 15.2 million shares. Finally, Wal-Mart (NYSE:WMT) scored big gains on analyst upgrade from Deutsche Bank.

Let’s take a closer look:

eBay (EBAY)

According to Bloomberg, eBay’s price increase was due to “speculation of interest from an activist investor.” Though the stock traded up more than 6%, it trimmed its gains into the close and ended up a mere 2%.

The renewed interest is much needed. Year-to-date, EBAY stock is down over 12%, lagging the broader S&P 500 by a wide margin. With its price chart stuck in a downtrend, however, rallies remain suspect until overhead resistance can be properly broken.

On the options trading front, call options dominated the session. Activity swelled to 759% of the average daily volume, with 127,338 total contracts traded. And 71% of the trading originated with calls reflecting mass upside speculation.

With the next earnings release set for Oct. 17, implied volatility has been in the midst of the typical pre-announcement lift. Yesterday’s action spurred the reading even higher, however. At 39%, implied volatility now sits at the 100th percentile of its one-year range.

Starbucks (SBUX)

Starbucks shares scored a shot of caffeine after news that famed Bill Ackman of Pershing Square Capital recently invested some $900 million in the company. While speaking at the Grant’s Interest Rate Observer conference in New York, Ackman revealed his fund’s average cost was $51.

As is often the case, the instant jump in the stock price when the news hit was pared back by day’s end. SBUX closed up 2% after spiking as much as 5.6%

On the options trading front, traders came after calls with a vengeance. Total activity lifted to 349% of the average daily volume, with 121,927 total contracts traded. 67% of the total came from calls.

The demand surge lifted implied volatility to its highest level since July. At 26%, the implied volatility now sits at the 76th percentile of its one-year range.

Walmart (WMT)

In a research note, analyst Paul Trussell of Deutsche Bank raised the firms rating for Walmart from hold to buy citing growth in its online grocery business. WMT closed up 2.5% on above-average volume. The upgrade was all the excuse traders needed to snatch up call options.

Total activity ramped to 318% of the average daily volume, with 116,501 total contracts traded. Call options absolutely dominated the session accounting for 79% of the day’s take.

Implied volatility rallied on the day to 27%. It’s now perched at the 49th percentile of its one-year range.

From a price perspective, yesterday’s jump created a breakout above the descending trendline that has defined the stock’s behavior since it’s mid-August earnings gap. Consider that a bullish omen.

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.

For a free trial to the best trading community on the planet and Tyler’s current home, click here!


Article printed from InvestorPlace Media, https://investorplace.com/2018/10/wednedsays-vital-data-ebay-starbucks-and-walmart/.

©2024 InvestorPlace Media, LLC