Friday’s Vital Data: Roku, Qualcomm and Disney

Options activity provides a look at expectations on ROKU, QCOM and DIS

U.S. stock futures are trading lower this morning after the Federal Reserve reaffirmed its commitment to further rate hikes. As widely expected, they decided to keep the Fed Funds rate unchanged during this month’s meeting, but the market is pricing in one more rate hike during their final 2018 meeting next month.

Friday's Options Trading: Roku, Qualcomm and DisneyHeading into the open, futures on the Dow Jones Industrial Average are down 0.45% and S&P 500 futures are lower by 0.5%. Nasdaq-100 futures have shed 0.82%.

In the options pits, calls slightly outpaced puts on the day. Specifically, about 17.8 million calls and 16.3 million puts changed hands on the session.

Over at the CBOE, the single-session equity put/call volume ratio ticked modestly higher to 0.64 — the center of its two-week range. The 10-day moving average held its ground at 0.66.

With the midterm elections now out of the way, traders turned their focus back to earnings. Roku (NASDAQ:ROKU) and Qualcomm (NASDAQ:QCOM) both plunged on disappointing reports driving heavy trading on the options front. Elsewhere, traders were jockeying for positions ahead of earnings from entertainment giant, Disney (NYSE:DIS).

Let’s take a closer look:

Roku (ROKU)

Traders slammed shares of up-and-coming streaming media company, Roku, yesterday after a disappointing earnings release. By day’s end ROKU fell 22% amid eye-popping volume. Chalk this up as the worst single-day drubbing for the company since its public debut in September 2017.

Roku beat earnings and revenue estimates but failed to impress the Street with its Q3 platform revenue and lukewarm guidance.

Since peaking at $77.57 just over one month ago, ROKU stock has shed a massive 41%. It now rests below its 200-day moving average for the first time in its short history.

On the options trading front, calls outpaced puts on the day. Activity swelled to 395% of the average daily volume, with 107,966 total contracts traded. Calls accounted for 64% of the day’s take.

The post-earnings volatility crush was on full display Thursday. Implied volatility fell to 71% placing it at the 36th percentile of its one-year range. Options are now pricing in daily moves of 4.5% so ratchet your expectations accordingly.

Qualcomm (QCOM)

Semiconductor maker, Qualcomm, suffered its worst one-day drop in a few years Thursday following its quarterly report. Though QCOM bested the Street’s earnings and revenue estimates, its revenue guidance missed the mark.

Weakness in China and the ongoing legal battle with Apple are two concerns that continue to circle the minds of investors.

On the options trading front, calls dominated the session despite the stock swoon. Activity ramped to 352% of the average daily volume, with 151,607 total contracts traded.63% of the trading came from call options.

Implied volatility cratered Thursday as traders rapidly unwound the uncertainty baked into option premiums ahead of the report. At 28%, implied volatility now rests at the 26th percentile of its one-year range. Traders are pricing-in daily moves of 1.7%.

Disney (DIS)

Traders took to the options market in laying out their bets ahead of Disney’s quarterly report yesterday. And with the results now out, we know that the entertainment behemoth beat the Street’s estimates on the top and bottom line. DIS earned $1.48 per share on revenue of $14.31 billion.

Those hoping for fireworks after earnings will have to settle for a bottle rocket. Disney shares are up a slight 1% in early morning trading. During the conference call, CEO Robert Iger unveiled the name of the company’s upcoming streaming service, Disney+ which is set to launch in late 2019.

On the options trading front, participants swarmed driving total volume for calls and puts well above average levels. Activity increased to 302% of the average daily volume, with 119,507 total contracts traded. Calls contributed 58% to the total.

Options were baking in a 3% move on earnings making this morning’s 1% gap well within expectations. This is a day where volatility sellers will happily take their money to the bank. Look for a large volatility crush today as earnings uncertainty is removed from premiums.

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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