Monday’s Vital Data: Pfizer, Goldman Sachs and Caterpillar

Options activity provides a look at expectations on PFE, GS, CAT

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U.S. stock futures and options trading volume are galloping higher following a promising turn in the trade war. During their meeting at the G-20 summit over the weekend, President Donald Trump and Chinese president Xi Jinping agreed to halt additional tariffs after Jan. 1.

Against this backdrop, futures on the Dow Jones Industrial Average are up 1.74% and S&P 500 futures are higher by 1.42%. Nasdaq-100 futures have added 2.10%.

In the options pits on Friday, call volume once again ruled the roost. Specifically, about 22.2 million calls and 18.1 million puts changed hands on the session.

The surge in call demand made waves over at the CBOE, where the single-session equity put/call volume ratio crashed to a three-week low at 0.53. The 10-day moving average continued its decline sliding to 0.69.

Options traders zeroed in on large caps. Pfizer (NYSE:PFE) saw renewed options interest after breaking out to fresh seventeen-year highs. Goldman Sachs (NYSE:GS) put volume ramped as the stock fell to a new 52-week low. Finally, Caterpillar (NYSE:CAT) was flooded with activity as its ongoing price recovery finally reclaimed the 50-day moving average.

Let’s take a closer look:

Pfizer (PFE)

The healthcare sector surged on Friday making it a standout among its peers. Pfizer led the charge with a big-league breakout to fresh seventeen-year highs. And if recent price action is any indication a re-test of its April 1999 record high could soon be in the offing.

PFE stock boasts relative strength in spades. Its 2018 performance has bested the broader market by a mile with the drug giant now up 28% year-to-date.

Friday’s high-volume surge lit a fire in the options market as many speculators selected derivates as their betting instrument of choice. Activity swelled to 315% of the average daily volume, with 84,792 total contracts traded. 89% of the trading came from call options alone.

Implied volatility inched higher on the day to 21% placing it at the 51st percentile of its one-year range. Traders are pricing in daily moves of 1.3%, making PFE a fairly tame stock considering the recent market turmoil.

Goldman Sachs (GS)

Investment bank Goldman Sachs slid to a new 52-week low Friday, even as the financial sector and the S&P 500 finished well into the green. The once-bright leader has become a serial underperformer.

The news was light on Friday, so the smackdown was likely a continuation of the significant selling pressure that struck the stock in early-November.

High volume accompanied the drop marking yet another distribution day in the ailing bank stock. Until institutions dispense with their selling campaign, GS will remain in the dog house.

On the options trading front, traders came after puts with a vengeance. Activity jumped to 198% of the average daily volume, with 70,376 total contracts traded. Puts accounted for 55% of the day’s take.

The increased demand drove implied volatility slightly higher on the day to 31%, placing it at the 75th percentile of its one-year range. Traders are pricing in daily moves of $3.70 or 1.9%.

Caterpillar (CAT)

The comeback in Caterpillar scored an exclamation point on Friday, lifting 4.2% amid heavy accumulation. The rally pole-vaulted the stock back above its 50-day moving average landing it square in the bull zone.

The rebound marks a sharp change in character after October’s beatdown due to growing trade war and economic slowdown concerns. And CAT shareholders will be pleased to know the gains were added to over the weekend with a favorable outcome to the G-20 summit. The stock is poised to open another 4.7% higher at $142.

On the options trading front, traders came after calls with a vengeance. Activity ballooned to 188% of the average daily volume, with 80,809 total contracts traded. Calls accounted for 65% of the total.

Implied volatility held steady on the day at 39% placing it at the 85th percentile of its one-year range. Traders are pricing-in daily moves of $3.35 or 2.5%.

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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