U.S. major indices are trending lower this morning amid weaker economic data from China that’s stoking global growth fears. The Dow Jones Industrial Average is down 0.81%, the S&P 500 is lower by 0.85% and the Nasdaq-100 is shedding 1.10%. In the options trading pits, call volume won the day even as overall volume levels remained subdued. Specifically, about 15.8 million calls and 14.3 million puts changed hands on the session.
Fear made a comeback over at the Chicago Board Options Exchange (CBOE) with the single-session equity put-call volume ratio rising to 0.75. The jump halted its one-week slide. Meanwhile, the 10-day moving average ticked higher to 0.67.
These are the three stocks atop the most-active list: XPO Logistics (NYSE:XPO) crashed following a negative report from short-seller Spruce Point Capital; Tilray (NASDAQ:TLRY) fell amid widespread weakness in pot stocks; Tesla (NASDAQ:TSLA) scored another strong day as it quickly approaches new record highs.
Let’s take a closer look:
XPO Logistics (XPO)
The persistent weakness in XPO stock came to a head yesterday with an epic crash. The transportation company plunged 20% almost undoing the entirety of its 2017 gains in a single trading session. A scathing report from Spruce Point Capital, a short-seller, was the catalyst. Among other negative items, the message highlighted XPO Logistics massive debt burden and its inability to create sustaining free cash flow as red flags for investors.
With Thursday’s beatdown and a previous 9% drop on an earnings warning from the company, XPO shares have shed some 50% of their value in the last ten days.
On the options trading front, traders came after calls with a vengeance. Activity swelled to 202% of the average daily volume, with 97,636 total contracts traded. 69% of the trading came from call options alone.
Implied volatility skyrocketed on the day to 128% placing it at the 100th percentile of its one-year range. Inflated premiums are now pricing in daily moves of $3.60 or 8%.
Marijuana stocks took it on the chin Thursday amid heavy selling pressure. And considering its hyped-up volatility, TLRY led the sector lower with a 10.6% loss to a new three-month low. The volume accompanying Tilray’s descent was the highest we’ve seen in a month. With the stock now submerged beneath the 50- and 20-day moving averages as well as the support level that had been supporting the stock in recent months, buyers should steer clear.
On the options trading front, puts ruled the roost as jittery investors took to the derivatives market to play the downside. Activity swelled to 222% of the average daily volume, with 76,085 total contracts traded. 59% of the trading came from put options alone.
The increased demand drove implied volatility higher on the day to 136% which is a new one-month high.
The upswing in Tesla tacked on another 2.8% gain even as the broader market failed to impress yesterday. Elon Musk’s flagship has been one of the few stocks to continue gaining ground while the market flounders and that makes it a top pick among strength seekers.
With the recent gains, Tesla is now testing the upper end of its two-year trading range. With record highs a mere stone’s throw away, traders could press their bets into year-end.
On the options trading front, calls outpaced puts on the session. Activity remained pumped at 129% of the average daily volume, with 198,118 total contracts traded. Calls contributed 55% of the day’s take.
As TSLA’s stock price reaches for the stars, uncertainty has been dissipating in a big way. Implied volatility cratered this week to 52% or the 22nd percentile of its one-year range. Premiums are now pricing in daily moves of $12.24 or 3.2%.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.