Tuesday’s Vital Data: Transocean, Tesla and Micron Technology

Options activity provides a look at expectations on RIG, TSLA, MU

U.S. stock futures are trading higher this morning as traders attempt to pick up the pieces following Monday’s bloodbath. Santa Claus and his much-foretold rally remain M.I.A.

stock market todayThe Federal Reserve kicks off a two-day meeting today with markets widely expecting another rate hike announcement tomorrow. Some soothing words from the monetary policy magicians could go a long way in calming turbulent markets.

Against this backdrop, futures on the Dow Jones Industrial Average are up 0.58% and S&P 500 futures are higher by 0.59%. Nasdaq-100 futures have added 0.57%.

In the options pits, put volume shot through the roof yesterday, helping to drive overall volume well above average levels. Specifically, about 20.9 million calls and 21.6 million puts changed hands on the session.

The fear spike made a massive impact at the CBOE, where the single-session equity put/call volume ratio surged to 0.97 — an 18-month high. Meanwhile, the 10-day moving average climbed to 0.74.

There were three stocks on the most-actives list yesterday. Transocean (NYSE:RIG) saw explosive put buying amid continued weakness in the oil patch. Tesla (NASDAQ:TSLA) options were active as the market leader finally succumbed to selling pressure. Finally, Micron Technology (NASDAQ:MU) options were hot ahead of Tuesday night’s earnings release.

Let’s take a closer look:

Transocean (RIG)

Transocean made a rare appearance atop the options leaderboard. The Switzerland-based offshore driller has suffered tremendously during the oil price plunge. Since peaking at $14.47 in October, RIG stock has lost just under 50% of its value. Not that volatile moves are foreign to the high-beta stock. It has always been a massive mover so consider the dramatic descent par for the course.

Its chart boasts a downtrend complete with falling 20-day and 50-day moving averages. In this environment, rallies remain suspect, the breeding ground for suckers. In the short run, RIG is extremely oversold. With the panic now bordering on capitulation, it’s no wonder put volumes are exploding.

On the options trading front, traders came after puts with a vengeance. Activity swelled to 336% of the average daily volume, with 101,111 total contracts traded. 89% of the trading came from put options alone.

The increased demand drove implied volatility higher on the day to 74%, placing it at the 100th percentile of its one-year range. Premiums are pricing in daily moves of 34 cents or 4.65%.

Tesla (TSLA)

Monday’s selling was indiscriminate. Even leaders like Tesla were taken behind the barn and shot. TSLA stock fell 4.7% on heavy volume, sacrificing all of the last two weeks worth of gains.

The descent comes as Elon Musk’s flagship was wrestling with overhead resistance in the $380 zone. This level has stymied every other advance for the past eighteen months so its no surprise to see sellers once again spoil the party — particularly given the bearish behavior inflicting the broader market.

On the options trading front, puts outpaced calls on the day. Activity lifted to 126% of the average daily volume, with 197,565 total contracts traded. Puts contributed 51% to the day’s take.

Implied volatility inched higher on the day to 64%, placing it at the 38th percentile of its one-year range. Premiums are pricing in daily moves of $14 or 4%.

Micron (MU)

The back half of 2018 has been a story of the great unwinding for Micron stock. Since peaking at a lofty $64.66 at the end of May, MU shares have been halved amid heavy selling pressure in chip stocks.

Yesterday’s down day was tame compared to the damage inflicted elsewhere, but the true driver of MU this week will be tonight’s earnings release. Traders are looking for something, anything positive to arrest the stock’s decline.

On the options trading front, calls won the session on Monday. Activity ended at 98% of the average daily volume, with 138,733 total contracts traded. Calls accounted for 53% of the day’s take.

Heading into tonight’s event, implied volatility sits at 66%, or the 96th percentile of its one-year range. Options are pricing in an earnings gap of $2.84 or 8.4%.

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-transocean-tesla-and-micron-technology/.

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