Friday’s Vital Data: Apple, Alibaba and Fitbit

options trading - Friday’s Vital Data: Apple, Alibaba and Fitbit

Source: Shutterstock

U.S. stock futures are trading higher this morning as the market rally begins what could be its fourth up day in a row. This week’s optimism marks a key change in sentiment versus the depression plaguing stocks in October.

Ahead of the bell, futures on the Dow Jones Industrial Average are up 1% and S&P 500 futures are higher by 0.73%. Nasdaq-100 futures have added 0.05%.

In the options pits, put volume continued retreating as optimism took hold over the three-day rally. Specifically, about 22.8 million calls and 18.4 million puts changed hands on the session.

The growing disparity between call and put demand had a big impact at the CBOE. The single-session equity put/call volume ratio plunged to 0.51 — a two-month low. The 10-day moving average fell back to 0.68.

Options activity continues to be heavy surrounding quarterly reports. Apple (NASDAQ:AAPL) options were active ahead of last night’s earnings. Alibaba (NASDAQ:BABA) saw renewed interest in anticipation of their report. Finally, Fitbit (NYSE:FIT) calls were hot after the stock surged on better-than-expected numbers.

Let’s take a closer look:

Apple (AAPL)

All eyes were on Apple stock last night as it reported earnings for its fiscal fourth quarter. The maker of all i-Things beat the Street’s earnings and sales estimates, but tepid forward guidance was all investors needed to hit the sell button. Currently AAPL stock is down 5.6% in pre-market trading.

AAPL reported $2.91 earnings per share on revenue of $62.9 billion. Analyst estimates for both heading into the report were $2.78 and $61.57, respectively.

With Apple stock being the one bright spot in a dismal environment of late you would think that its failure to launch on earnings would spell trouble for the market. But you would be wrong. Futures across the board are firmly in the green despite Apple’s after-hours slip.

On the options trading front, calls slightly outpaced puts on the day. Activity swelled to 136% of the average daily volume, with 776,349 total contracts traded; 57% of the trading came from call options.

The $12.50 loss AAPL is currently suffering in pre-market trading is within the expected range of $14 that was priced in to option premiums ahead of last night’s report. While shareholders are disappointed, a down gap is greeting them this morning, this is far from a monster move.

Alibaba (BABA)

Alibaba was a second big hitter stepping up to the earnings plate overnight. Chinese stocks have been hit especially hard in recent months over tariff woes, so hopes were high that a solid report from a potential leader like BABA could finally arrest the decline.

The e-commerce giant reported earnings of $1.11 per share on revenue of $12.39 billion. The Street’s initial reaction took BABA shares up as much as 5% pre-market.

The downtrend gripping BABA stock since June has been relentless. Despite the earnings power behind this morning’s up gap, I suggest treating it with the same skepticism that prior rebounds deserved. The 50-day moving average rests at $157 and needs to be vaulted above before buyers have a technical leg to stand on.

On the options trading front, calls ruled the day as traders jockeyed for positions ahead of the report. Activity jumped to 202% of the average daily volume, with 485,853 total contracts traded. Calls accounted for 66% of the day’s take.

If the 5% gain holds into the open, it will match the expected move that options traders priced-in ahead of time. Like AAPL, this reaction is fairly muted and may fail in pulling BABA out of its overall downtrend.

Fitbit (FIT)

Earnings provided a shot of adrenaline for Fitbit this quarter. The fitness-tracker maker bested the Street’s earnings and revenue estimates while maintaining its full-year guidance. FIT earned 4 cents per share on revenue of $394 million.

Yesterday’s 26% moonshot lifted the beleaguered stock back above all its major moving averages in one fell swoop. With its downtrend now dashed, buyers are flocking in on hopes that Thursday’s jump will spark a sustainable ascent.

On the options trading front, call demand dominated. Activity ramped to 368% of the average daily volume, with 90,854 total contracts traded. Calls claimed 63% of the total.

The post-earnings volatility crush was on full display yesterday bringing implied volatility back to 73% or the 56th percentile. At current levels, traders are pricing-in daily moves of 4.5%

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.

Article printed from InvestorPlace Media,

©2021 InvestorPlace Media, LLC