Friday’s Vital Data: Twitter, AT&T, Bank of America

Options trading activity provides a look at expectations on T, TWTR and BAC

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U.S. stock futures are trading around unchanged after another volatile day on the Street. The usual suspects (slowing global growth, a never-ending trade war, a hawkish Federal Reserve) continue to be bandied about as reasons for the gloom.

In early morning trading, futures on the Dow Jones Industrial Average are up 0.13% and S&P 500 futures are higher by 0.07%. Nasdaq-100 futures have added 0.01%.

In the options trading pits, put volume exploded yesterday reflecting massive panic among traders. Specifically, about 21.9 million calls and 32 million puts changed hands on the session.

The mad dash for protection made an impact at the CBOE, where the single-session equity put/call volume ratio rose to 0.81 — its second-highest reading of the year. The 10-day moving average lifted to 0.77 which is its highest level of the year.

Here are three stocks that landed atop the most-actives list. Twitter (NYSE:TWTR) saw renewed options interest amid an 11% price plunge. AT&T (NYSE:T) options were hot amid a price breakdown to a new 2018 low. Finally, Bank of America (NYSE:BAC) saw a surge in call trading as beaten-down banks tried to stage a turnaround.

Let’s take a closer look:

Twitter (TWTR)

One of the characteristics of capitulation is sellers finally come after leading stocks that had previously been holding firm. Such was the case with Twitter on Thursday. For the past two months, TWTR stock has been flying above its 50-day moving average, even touching a new five-month high last week.

But with yesterdays 11% crash, Twitter finally fell victim to the selling pressure that has been hounding the broader market for weeks. I take this as evidence that a bounce is imminent in the overall market.

Unfortunately for Twitter, its chart is now a mess leaving little to go off of for divining direction.

On the options trading front, puts outpaced calls on the session. Activity swelled to 327% of the average daily volume, with 285,037 total contracts traded. Puts accounted for 54% of the day’s take.

The increased demand drove implied volatility higher on the day to 73% placing it at the 72nd percentile of its one-year range. Premiums are now pricing in daily moves of $1.35 or 4.6%.

AT&T (T)

Yield hunters are starting to salivate over AT&T. With Thursday’s breakdown to a new 52-week low, the telecom titan’s dividend yield sailed past the 7% threshold.

But while the potential income is mouthwatering, the company’s price action leaves much to be desired. Its year-to-date losses have now grown to 26%, and it remains below descending 200-day, 50-day, and 20-day moving averages.

On the options trading front, calls won the day despite the price plunge. Total activity grew to 172% of the average daily volume, with 149,542 total contracts traded. 58% of the total came from call options.

Implied volatility lifted on the day to 34% placing it at the 100th percentile of its one-year range. Premiums are now pricing in daily moves of 61 cents or 2.1%

Bank of America (BAC)

Bank stocks, which have been one of the weakest areas of the market, finally showed some relative strength yesterday. And Bank of America was one of the best. It was green for most of the day before sliding into the red right before the closing bell.

I take the strength as a sign that selling pressure in financials could finally be washed out. Even though it may be short-lived due to BAC stock’s strong downtrend, watch for a rally over the coming days.

On the options trading front, calls are trading hands with aggression. The total activity ended the day at 165% of the average daily volume, with 604,386 total contracts traded. Looking at the data, 85% of the trading came from call options alone!

Implied volatility ticked slightly higher to 24% placing it at the 100th percentile of its one-year range. Premiums are pricing in daily moves of 64 cents or 2.7%

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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