U.S. stock futures are trading well into the green this morning ahead of the bell. The good vibes created by yesterday’s all-time closing high in the Dow Jones Industrial Average are keeping traders optimistic. Dow Jones futures are up 0.39%, while S&P 500 futures have risen by 0.38%. Nasdaq-100 futures have added 0.45%. In the options trading pits, we saw an increase in volumes across the board. Specifically, about 19.1 million calls and 14.3 million puts changed hands on the session.
On the CBOE, the single-session equity put-call volume ratio continued its slide by falling to 0.54. Meanwhile, the 10-day moving average held steady at 0.58.
We saw a groundswell of options trading activity in a few select names. Stitch Fix (NASDAQ:SFIX) plunged after disappointing investors on poor earnings results. Intel (NASDAQ:INTC) rebounded sharply following a recent downgrade. Finally, General Electric (NYSE:GE) continues to be popular following the news of a CEO change.
Let’s take a closer look at options trading volume:
Stitch Fix (SFIX)
Stitch Fix entered its earnings day the belle of the ball. Giddy investors had lifted the online subscription and shopping service by more than 170% at one point over the past quarter alone. The massive gains meant a lot was riding on the results of this week’s earnings update. Unfortunately, the company whiffed and was summarily punished.
Stitch Fix surpassed earnings estimates by posting a profit of 18 cents per share for the quarter. But, its revenue numbers were below expectations. By day’s end, SFIX stock had fallen over 35% and given back the lion’s shares of last quarter’s gains.
On the options trading front, the volume percentage rocketed to 722% of average daily volume. Nothing like a one-third haircut in SFIX stock to bring some excitement into the derivatives. Surprisingly, the ratio of calls versus puts was relatively balanced with 56% of the trading falling on the call side.
Implied volatility (IV) fell on the day as option premiums rapidly removed the earning’s gap from expectations. Nonetheless, IV remains elevated at 79% and suggests 5% daily moves could be the norm for a spell.
Yesterday’s 3.6% gain in Intel contributed to the Dow Jones’ jump to a new record. The sharp rally from the chipmaker was a welcome development after Monday’s slide due to a downgrade by the investment bank Barclays.
On the options trading front, trading jumped to 275% average daily volume with call options dominating. By day’s end, call trading accounted for 69% of total activity.
The increased demand for derivatives has driven implied volatility higher by four points from 25% to 29%. With the surge, INTC implied volatility now rests at the 50th percentile of its one-year range. Short premium strategies are officially attractive again.
Based on current volatility levels, the daily expected price move for INTC stands at 1.84%.
General Electric (GE)
General Electric continues to see elevated activity as traders grapple with the implications of its CEO change. On Monday, John Flannery was replaced by Lawrence Culp. The shake-up is breathing new life into GE stock and ushered in an upgrade to outperform from RBC Capital Markets.
Yesterday saw a volatile ride in GE stock, but it ended higher by 1.9%. The gains come on the heels of Monday’s sharp 7% rise.
On the options front, trading remained elevated at 228% average daily volume. Calls accounted for 58% of the total, which was a modest increase from the 51% share it had during Monday’s trading.
Implied volatility remains elevated at 40% which translates into an IV rank of 60%. Premium sellers are being paid for taking risk right now.
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.