Thursday’s Vital Data: General Motors, JPMorgan Chase and Advanced Micro Devices

Options activity provides a look at expectations on AMD, GM and JPM

By Tyler Craig, Tales of a Technician

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U.S. stock futures are trading deep in the red as traders return from a rare mid-week day off due to the funeral of President George H. W. Bush. The break did little to ease growing concerns of a slowing economy and an extended trade war.

Thursday's Vital Data: General Motors (GM), JPMorgan Chase (JPM) and Advanced Micro Devices (AMD)Ahead of the bell, futures on the Dow Jones Industrial Average are down 1.74% and S&P 500 futures are lower by 1.59%. Nasdaq-100 futures have shed 2.04%.

In the options pits, put volume surged amid Tuesday’s swoon. Specifically, about 23.2 million calls and 22.8 million puts changed hands on the session.

The dash for puts was felt at the CBOE as well. The single-session equity put/call volume rocketed to 0.69 while the 10-day moving average held its ground at 0.67.

Options activity was hopping in three key names on Tuesday. General Motors (NYSE:GM) calls were hot ahead of Thursday’s quarterly dividend. JPMorgan Chase (NYSE:JPM) saw renewed put interest on fears of an economic slowdown hurting the banking sector. Finally, Advanced Micro Devices (NASDAQ:AMD) options remained popular as the stock fell 11% amid heavy profit-taking.

Let’s take a closer look:

General Motors (GM)

General Motors stock recovered nicely following its late-October quarterly report and news of the automakers plans to close four U.S. plants and lay off over 10,000 workers. The changes come as a result of its increased focus on the electric vehicle market.

While the Street rewarded GM stock for the cost-cutting and structural shifts, Congress isn’t sharing the enthusiasm. Chief executive, Mary Barra, reported to Capitol Hill this week in an attempt to smooth ruffled feathers and explain General Motors’ decisions.

On the options trading front, traders came after calls with a vengeance. Activity swelled to 248% of the average daily volume, with 106,005 total contracts traded. About 83% of the trading came from call options alone.

As mentioned in the introduction, the primary reason for GM landing atop the most-actives list was its upcoming dividend. Calls dominated due to traders looking to buy shares so they had rights to the 38-cent-per-share payout.

Implied volatility traveled higher on the day to 34%, placing it at the 53rd percentile of its one-year range. Traders are pricing-in daily moves of 77 cents or 2.1%.

JPMorgan Chase (JPM)

Yield curve inversion is the talk of the town these days, and bank stocks are suffering because of it. The concerns with this recent signal emanating from the bond market are two-fold. First, the flattening of the curve reduces the profit-making abilities of banks by shrinking the difference between what banks pay on deposits and what they can charge on loans. Second, yield curve inversion has precipitated recessions with incredible consistency over the past 100 years.

And, in case it wasn’t obvious, banking profits suffer during economic slowdowns.

The financial sector was one of the hardest hit areas on Tuesday with JPM falling 4.4% amid heavy distribution.

On the options trading front, puts won the day. Activity jumped to 197% of the average daily volume, with 102,560 total contracts traded. Puts accounted for 61% of the day’s take.

The increased demand drove implied volatility sharply higher to 30%, placing it at the 74th percentile of its one-year range. Traders are now pricing in daily moves of $2.04 or 1.9%.

Advanced Micro Devices (AMD)

What a difference a day makes. AMD went from hero to zero in less than 24 hours. As mentioned in Tuesday’s Vital Data article, Advanced Micro Devices was one of the biggest winners over the optimism emanating from the U.S.-China talks at the G-20 summit. With Tuesday’s 11% drubbing, however, the gains have all but unwound.

The rejection transpired at the 50-day moving average, which should now be considered a pivotal resistance level that needs to be broken if AMD stock is going to have any chance at reclaiming its former glory.

On the options trading front, traders showed equal affection to puts and calls. Activity climbed to 151% of the average daily volume, with 408,094 total contracts traded. Calls only slightly outpaced puts at 51% of the day’s total.

Implied volatility bumped higher on the day to 73%, placing it at the 57th percentile of its one-year range. Traders are pricing in daily moves of 97 cents or 4.6%.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2018/12/thursdays-vital-data-general-motors-jpmorgan-chase-and-advanced-micro-devices/.

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