Thursday’s Vital Data: FedEx, Facebook, Citigroup

Options activity provides a look at expectations on FDX, FB and C

U.S. stock futures are trading slightly lower this morning as the post-Federal-Reserve-announcement fallout continues to weigh on the market. Yesterday’s quarter-point rise in interest rate and failure of Fed chair Jerome Powell to strike a sufficiently dovish tone continues to weigh heavily on asset prices.

stock market todayIn early morning trading, futures on the Dow Jones Industrial Average are down 0.24% and S&P 500 futures are lower by 0.25%. Nasdaq-100 futures have shed 0.36%.

In the options pits, put demand surged yesterday as traders ran for the hills following the Fed announcement. Overall volume levels ended well above average. Specifically, about 22.7 million calls and 24.9 million puts changed hands on the session.

Meanwhile, over at the CBOE the single-session equity put/call volume ratio rallied to its third-highest reading of the year — 0.85. The 10-day moving average closed at a new high for 2018 at 0.76.

Here were three stocks atop the most-actives list. FedEx (NYSE:FDX) shares were demolished after providing a dismal forecast for 2019 earnings. Facebook (NASDAQ:FB) plunged after a negative New York Times article. Finally, Citigroup (NYSE:C) was flooded with activity amid ongoing weakness in bank stocks.

Let’s take a closer look:

FedEx (FDX)

Transportation titan FedEx took center stage yesterday as investors reacted to its latest earnings report. The lackluster showing stoked fears of a global economic slowdown and lopped more than 12% off of its share price amid panic level volume. This was FedEx’s worst one-day drop since 2008.

Since peaking in January at $274.66, FDX stock has lost 41% of its value.

The company revised its earnings forecasts for 2019 lower, citing tepid demand for their international business. Europe and China were both mentioned as areas for concern.

On the options trading front, puts outpaced calls on the session. Activity swelled to 499% of the average daily volume, with 101,892 total contracts traded. Puts accounted for 53% of the day’s take.

With earnings now in the rearview mirror, implied volatility fell on the day to 37%, or the 65th percentile of its one-year range. Premiums are now pricing in daily moves of $3.75 or 2.3%.

Facebook (FB)

The impressive recovery attempt in FB stock finally succumbed to gravity yesterday. Technicians will point toward the declining 50-day moving average as the reason for the rejection. But news followers are citing a negative New York Times article published on Tuesday that said Facebook gave more user data to other companies than it has disclosed.

FB fell 7.3% making it one of the worst performing stocks in the technology sector. With its downtrend now back on, look for an eventual retest of its 52-week low at $126.85.

On the options trading front, puts dominated the session. Total activity jumped to 234% of the average daily volume, with 658,437 total contracts traded. 62% of the trading came from put options alone.

The increased demand drove implied volatility higher on the day to 44%, placing it at the 74th percentile of its one-year range. Premiums are now pricing in daily moves of $3.67 or 2.8%

Citigroup (C)

The beating in bank stocks just keeps on coming. Citigroup fell for its eleventh day in a row as post-Fed selling reversed its early session gains. With the stock unable to buy a bid and submerged beneath descending moving averages of all time frames, there remains little technical reason for optimism.

One potential bearish catalyst yesterday was a Bloomberg report highlighted a potential $180 million loss the bank could suffer on loans provided to an Asian hedge fund.

On the options trading front, traders came after puts with a vengeance. Total activity grew to 164% of the average daily volume, with 157,085 total contracts traded. Puts added 64% to the day’s total.

Implied volatility held steady at 45% placing it at the 100th percentile of its one-year range. Pumped-up premiums are pricing in daily moves of $1.49 or 2.8%.

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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