Monday’s Vital Data: Exxon Mobil, Bank of America, and American Airlines

Options activity provides a look at expectations on XOM, BAC, and AAL

U.S. stock futures are trading sharply higher as traders attempt to pare the recent market losses. Last week’s sell-fest had driven the S&P 500 to its lowest closing price since April.

Monday's Vital Data: Exxon Mobil, Bank of America, and American AirlinesAhead of the bell, futures on the Dow Jones Industrial Average are up 0.96% and S&P 500 futures are higher by 1.05%. Nasdaq-100 futures have added 1.47%.

In the options pits, Friday’s holiday-shortened session left little to talk about on the volume front. With traders in a turkey coma only about 9.2 million calls traded and 9 million puts changed hands on the day.

Despite the lackluster volume, it was puts that dominated over at the CBOE. In fact, the single-session equity put/call volume ratio jumped to 0.85, which was a new high for the fall market correction. The 10-day moving average closed at 0.76 — a new 2018 high.

Options activity was light on Friday. Exxon Mobil (NYSE:XOM) shares are suffering amid crashing crude oil prices. Bank of America (NYSE:BAC) calls were active even as its shares fell on the day. Finally, American Airlines (NYSE:AAL) was flooded with activity amid its unit sale.

Let’s take a closer look:

Exxon Mobil (XOM)

The ongoing oil crash is taking a toll on Exxon Mobil. The industry king slid to a new seven-month low on Friday at $75.49 bringing its peak-to-trough losses to 13.6%. Meanwhile, crude oil is fast approaching the $40s after resting close to $80 just last month.

Given the bloodbath in black gold, XOM stock holders should be happy that the damage has been limited to only 13.6% at this point.

The technical posture of Exxon and the broader energy sector remains a mess. Both are submerged beneath all major moving averages suggesting rallies should be viewed with extreme skepticism for now.

On the options trading front, calls slightly outpaced puts on the day. Friday’s short session cut activity to 88% of the average daily volume, with 37,161 total contracts traded. 53% of the trading came from call options.

The increased demand drove implied volatility higher on the day to 27% placing it at the 80th percentile of its one-year range. Traders are pricing-in daily moves of 1.7%.

Bank of America (BAC)

Bank of America shares succumbed to the selling pressure on Friday, dipping well into the red. The sole silver lining is it remains well above its October lows even though the S&P 500 Index fell all the way back down to its previous lows. You can chalk this up as a wee bit of strength, at least on a relative basis.

BAC stock remains below every major moving average so sellers are still very much in control of its trend.

On the options trading front, calls ruled the day despite the downturn. Activity ended at 82% of the average daily volume, with 309,705 total contracts traded. Calls accounted for 83% of the day’s take.

Implied volatility lifted slightly on the day to 31% placing it at the 63rd percentile of its one-year range. Traders are now pricing in daily moves of 2%.

American Airlines (AAL)

Airline stocks have been holding firm amid the market carnage. And the behavior of American Airlines serves as a good illustration. With Friday’s 4.5% upshot, AAL stock has now recovered almost all of the ground lost during October’s slide.

Perhaps crashing oil prices are buoying the airliner. Or maybe it’s the fact that AAL’s peak-to-trough losses for 2018 were approaching 50% and bargain hunters finally entered the fray. Either way, the stock is now back above its 50-day moving average and looking to extend its gains in premarket trading Monday.

On the options trading front, traders came after calls with a vengeance. Activity swelled to 93% of the average daily volume, with 47,147 total contracts traded. 80% of the trading came from call options alone.

Implied volatility ticked higher on the day to 48%, placing it at the 71st percentile of its one-year range. Traders are pricing-in 3% daily moves.

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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