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Tuesday’s Vital Data: Disney, Nvidia and Square

Options activity provides a look at expectations on SQ, NVDA and DIS

By Tyler Craig, Tales of a Technician

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U.S. stock futures are trading sharply lower this morning. High-momentum stocks and tech giants in the infamous FAANG gang all continued sliding after hours and are pressuring the Nasdaq once again.

Elsewhere in retail land, Target (NYSE:TGT) shares are being dismantled to the tune of 12% premarket on disappointing Q3 earnings results. The slide is weighing on the retail sector, and many of its peers are getting slashed in sympathy.

Against this backdrop, futures on the Dow Jones Industrial Average are down 1.44% and S&P 500 futures are lower by 1.46%. Nasdaq-100 futures have shed over 2%.

In the options pits, overall volume levels were modest despite the outsized selling pressure in tech stocks. Specifically, about 18.6 million calls and 18 million puts changed hands on the session.

Over at the CBOE, the lack of panic kept the single-session equity put/call volume ratio from delivering any type of capitulation-esque spike. It ended the day down slightly at 0.72. Meanwhile, the 10-day moving average climbed to a new nine-month high at 0.71.

Options traders zeroed in on momentum stocks. The demolition in Nvidia (NASDAQ:NVDA) continued for the second day in a row. Square (NYSE:SQ) fell below its 200-day moving average on large volume. And Disney (NYSE:DIS) was active after China approved its acquisition of Twenty-First Century Fox (NASDAQ:FOXA).

Let’s take a closer look:

Tuesday's Vital Data: Disney (DIS), Nvidia (NVDA) and Square (SQ)

Nvidia (NVDA)

As highlighted in yesterday’s Vital Data piece, NVDA earnings and guidance have sent shareholders running for the hills. Tack on the ongoing crash in bitcoin (which is down another 8% this morning) and … well, when it rains it pours. Chip stocks formed the backbone of the historic run in the Nasdaq, so the significance of their rapid unwinding cannot be overstated.

Since peaking a short six weeks ago at $292.76, Nvidia has lost 51% of its value. What’s perhaps most insane is the stock has only returned to where it was in July of last year reflecting just how meteoric its rise had become.

On the options trading front, popularity was split 50-50 between calls and puts. Activity remained lofty at 210% of the average daily volume, with 339,214 total contracts traded.

The increased demand drove implied volatility higher on the day to 69%, placing it at the 72nd percentile of its one-year range. Traders are pricing-in daily moves of $6.25 or 4.3%.

Square (SQ)

Destruction has come to momentum stocks across the land and SQ finds itself squarely in the crosshairs. The San Francisco-based payments company cratered 10.79% yesterday amid heavy volume. The slide continued after hours and SQ finds itself down another 8.4% premarket.

As far as news goes, there isn’t anything to report. Market sentiment is souring, and as investors shed risk from their portfolios, it is high growth, high multiple names like SQ that are the most vulnerable.

On the options trading front, calls outpaced puts on the session. Activity ticked higher to 127% of the average daily volume, with 123,541 total contracts traded. 62% of the trading came from call options.

The demand surge drove implied volatility up to 75% placing it at the 80th percentile of its one-year range. Option premiums are now pricing-in daily moves of $2.97 or 4.7%.

Disney (DIS)

Disney has been a bastion of strength during the market correction. At over $114 it remains a stone’s throw from all-time highs and is one of the few stocks still above its rising 50-day moving average.

Though DIS shares ended lower on the day, they were up over 1% earlier in the trading session on news from a CNBC report that China approved the company’s acquisition of Twenty-First Century Fox.

On the options trading front, calls dominated on the day. Activity ramped to 171% of the average daily volume, with 81,146 total contracts traded. Calls accounted for 67% of the day’s take.

Compared to the excitement elsewhere, Disney’s implied volatility has been downright boring. It’s holding steady at 22%, or the 35th percentile of its one-year range. Traders are pricing in daily moves of $1.61 or 1.4%.

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, https://investorplace.com/2018/11/tuesdays-vital-data-disney-nvidia-and-square/.

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