U.S. stock futures are trading lower this morning after staging one of the strongest one-day rallies in ages. Yesterday’s 1,086 point gain for the Dow Jones Industrial Average marked its largest single-session point gain in history. This morning’s gap lower will test the resolve of buyers and confirm whether yesterday was a one-off or the beginning of a more substantial recovery.
Heading into the open, futures on the Dow Jones Industrial Average are down 1.51% and S&P 500 futures are lower by 1.53%. Nasdaq-100 futures have shed 1.54%.
In the options pits, call volume spiked sharply yesterday, helping drive overall volume well above average levels. Specifically, about 23.1 million calls and 21 million puts changed hands on the session.
The optimism was felt at the CBOE, where the single-session equity put/call volume ratio cratered to 0.62. Meanwhile, the 10-day moving average held its ground at 0.81.
Options traders zeroed in on technology stocks yesterday. Facebook (NASDAQ:FB) saw renewed options interest amid an impressive 8% rally. Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) followed suit with strong gains and increased options trading of their own.
Let’s take a closer look:
Facebook (FB)
Facebook’s ailing shares received a much-needed boost yesterday rallying 8.2% amid heavy volume. The gains lifted the once high-flying social media titan from its 52-week low notched during the prior trading session.
Although FB stock remains beneath all major moving averages, a slight RSI bullish divergence is starting to form, which suggests downside momentum is waning. Upside follow through is needed, but yesterday provided a promising turn in the right direction.
On the options trading front, calls slightly outpaced puts on the session. Activity increased to 146% of the average daily volume, with 424,450 total contracts traded. Call options accounted for 53% of the day’s total.
With panic subsiding, implied volatility slid on the day to 50%, placing it at the 84th percentile of its one-year range. Premiums are pricing in daily moves of $4.20 or 3.1%.
Microsoft (MSFT)
The tech stock surge lifted MSFT stock 6.8% on Wednesday, but the rally lacked any kind of eye-popping volume. MSFT stock has now returned to the scene of its massive support breach near $100 giving it the chance to turn the breakout into a fakeout.
Much of the manic market moves are being technically driven, with little by way of individual stock news to focus on. This is the case with MSFT’s massive price jump yesterday.
On the options trading front, traders were aggressively snatching up calls. Activity swelled to 129% of the average daily volume, with 235,426 total contracts traded. 58% of the trading came from call options alone.
Implied volatility fell back to 42%, moving it back to the 77th percentile of its one-year range. Premiums are now pricing in daily moves of $2.66 or 2.6%.
Apple (AAPL)
Apple shares caught a bid alongside every other tech darling Wednesday. By day’s end, the maker of all i-things had risen 7% and reclaimed all that was lost in the prior two disastrous trading sessions.
Despite the impressive gains, the trend remains mired in weakness. The RSI tagged a new low alongside its price this week signaling downside momentum is increasing. That means for now this rebound should be viewed as one of the dead-cat variety.
On the options trading front, calls won the day. Activity lifted to 125% of the average daily volume, with 795,563 total contracts traded. Calls contributed 55% to the day’s take.
Implied volatility fell on the day to 43% placing it at the 81st percentile of its one-year range. Premiums are pricing in daily moves of $4.29 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.
