U.S. stock futures are trading higher this morning following Tuesday’s wildly volatile trading session. Vigilance remains the watchword as whipsaw movements and fakeouts continue to multiply in the market. A different verse of the same song is dominating the headlines this morning — the trade war.
Against this backdrop, futures on the Dow Jones Industrial Average are up 1.21% and S&P 500 futures are higher by 1.21%. Nasdaq-100 futures have added 1.45%.
In the options pits, urgency seemed to fade as overall volume fell back. Specifically, about 17.9 million calls and 16.2 million puts changed hands on the session.
We saw similar dynamics at the CBOE, where the single-session equity put/call volume ratio slid to 0.65. The 10-day moving average dropped to 0.66.
Options activity was a mixed bag on Tuesday. Coca-Cola (NYSE:KO) saw renewed options interest despite a lackluster trading session. Twitter (NYSE:TWTR) shares were up as much as 6.9%, breathing new life into its options. Finally, Wells Fargo (NYSE:WFC) suffered heavy selling pressure for the fifth day in a row.
Let’s take a closer look:
Coca-Cola (KO)
The news was light for the soda king yesterday, but traders made a mad dash for puts and landed Coca-Cola atop the most-actives list anyways. The sharp uptick in put trading is curious given the stock’s relatively nondescript doji candlestick on the day. Furthermore, it remains in the heart of the trading range that took root a month back that is allowing KO to digest the big post-earnings gains it recently scored.
Consumer staple stocks have been all the rage as investors have fled into low-beta defensive names to escape the carnage being wreaked elsewhere.
On the options trading front, puts dominated the session. Total activity rose to 329% of the average daily volume, with 86,313 total contracts traded. 88% of the trading came from put options alone.
Implied volatility moved sideways on the day, remaining at 19%, or the 41st percentile of its one-year range. Premiums are pricing in daily moves of 60 cents or 1.2%.
Twitter (TWTR)
Twitter shares were percolating yesterday, rising as much as 6.9% amid higher-than-average volume. Profit-taking eventually took root, paring the gains considerably, but the excitement was enough to breath new life into its listed options.
The rally succeeded in lifting TWTR stock back above its 200-day moving average while testing the upper end of its two-month trading range. The key level to watch is $36, which is proving a formidable ceiling. Once buyers finally bust through it, expect swift gains to ensue.
On the options front, traders were chasing calls all day. Total activity swelled to 227% of the average daily volume, with 161,549 total contracts traded. Calls contributed 64% to the day’s take.
Implied volatility held steady at 53%, or the 38th percentile of its one-year range. Premiums are pricing in daily moves of $1.16 or 3.4%
Wells Fargo (WFC)
The financial sector continues to lead market weakness, and the action in WFC is the perfect poster child. It’s now suffered five consecutive days of massive distribution resulting in a breach of major support at $50. I consider the breakdown an ill omen and suggest viewing rallies with extreme skepticism for the time being.
On the options trading front, calls only slightly outpaced puts. Activity ended at 173% of the average daily volume, with 79,819 total contracts traded. Calls accounted for 52% of the day’s take.
Implied volatility remains sky high at 36%, or the 98th percentile of its one-year range. Options sellers are being handsomely rewarded with the richest premiums of the year.
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.
