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Tuesday’s Vital Data: Apple, Ford and Bank of America

Options activity provides a look at expectations on AAPL. F and BAC

By Tyler Craig, Tales of a Technician

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U.S. stock futures are trading higher this morning extending yesterday’s gains. After briefly breaching pivotal support at 2,600 the S&P 500 came roaring back to close back in its two-month trading range giving bulls a much-needed victory on Monday.

Tuesday's Vital Data: Apple, Ford and Bank of AmericaAhead of the bell, futures on the Dow Jones Industrial Average are up 1.23% and S&P 500 futures are higher by 1.16%. Nasdaq-100 futures have added 1.46%.

In the options pits, calls and puts held similar appeal to traders. Specifically, about 19 million calls and 19 million puts changed hands on the session.

However, calls won the day at the CBOE, where the single-session equity put/call volume ratio fell to 0.70. Meanwhile, the 10-day moving average dropped to 0.66.

Options activity was a mixed bag on Monday. Apple (NASDAQ:AAPL) saw renewed options interest on news that China was banning sales of its older models. Ford (NYSE:F) tumbled amid heavy selling pressure in automakers. Finally, Bank of America (NYSE:BAC) continues to sag as economic slowdown worries weigh on the financial sector.

Let’s take a closer look:

Apple (AAPL)

Qualcomm (NASDAQ:QCOM) scored a victory in its lawsuit against Apple on Monday. A Chinese court banned the sale of many iPhone models that Qualcomm claims violate its patents. The phones affected by the judgment include the iPhone 6S, iPhone 6S Plus, iPhone 7, iPhone 7 Plus, iPhone 8, iPhone 8 Plus and iPhone X.

AAPL stock took the news in stride and even led the market turnaround to finish in the green. The reversal could mark a short-term turnaround in the stock, but with Apple shares entrenched in a downtrend and 30% off their highs, much work remains before the sinking ship has been righted.

On the options trading front, traders came after calls alongside the stock. Total activity inched modestly higher to 119% of the average daily volume, with 812,465 total contracts traded. Calls accounted for 59% of the day’s take.

Fear subsided on the day driving implied volatility down to 36%, placing it at the 73rd percentile of its one-year range. Premiums are now pricing in daily moves of $3.80 or 2.2%.

Ford (F)

With Christmas fast approaching, Ford is limping into year-end like a wounded dog. The trade war continues to hamper the stocks recovery attempts. With yesterday’s drubbing, F shares are now down 13.5% in the past five trading sessions.

On a bright note, a Bloomberg News report that China is moving to cut tariffs on American-made vehicles is sending Ford and other auto stocks higher premarket. At the time of this writing, Ford is up 2.7%.

On the options trading front, puts outpaced calls by a wide margin. Activity swelled to 217% of the average daily volume, with 165,406 total contracts traded. 69% of the trading came from put options alone.

Implied volatility shot higher on the day to 44%, placing it at the 76th percentile of its one-year range. Premiums are now pricing in daily moves of 23 cents or 2.7%.

Bank of America (BAC)

Bank stocks dominated the most-actives list yesterday with Bank of America leading the popularity. The inverted yield curve and economic slowdown worries are weighing heavily on the financial sector. At yesterday’s lows, the space was down 11.5% over the past five trading sessions alone.

Meanwhile, BAC was down 16.4% over the same time frame amid strong volume. With the stock so oversold, a snap-back is likely but make no mistake; rallies are born to fail.

On the options trading front, calls dominated the session despite the stock’s slide. Total activity lifted to 217% of the average daily volume, with 625,677 total contracts traded. Puts accounted for 81% of the total.

The past week’s downdraft lit a fire under BAC’s implied volatility. Yesterday it popped to 39%, placing it at the 97th percentile of its one-year range. Premiums are now pricing in daily moves of 62 cents 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.


Article printed from InvestorPlace Media, https://investorplace.com/2018/12/tuesdays-vital-data-apple-ford-and-bank-of-america/.

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