Friday’s Vital Data: Apple, American Airlines and Bristol-Myers

Options activity provides a look at expectations on AAPL, AAL and BMY

U.S. stock futures are trading higher this morning as buyers emerge following yesterday’s tech-driven selloff. Credit for the buying binge goes to today’s jobs report, which shows the U.S. added 312,000 jobs in December which smashed economists’ expectations for 182,000 jobs.

Friday's Vital Data: Apple, American Airlines, Bristol-MyersAhead of the bell, futures on the Dow Jones Industrial Average are up 1.3% and S&P 500 futures are higher by 1.34%. Nasdaq-100 futures have added 1.52%.

In the options pits, put volume jumped alongside the market swoon. Specifically, about 16.2 million calls and 17.5 million puts changed hands on the session.

The put surge was seen at the CBOE as well. The single-session equity put/call volume ratio climbed to 0.73 — a one-week high. Meanwhile, the 10-day moving average ticked higher to 0.75.

Options activity was hopping in a handful of stocks yesterday. Apple (NASDAQ:AAPL) shares slid 10% after the company dramatically slashed their revenue guidance for the quarter. American Airlines (NYSE:AAL) fell to a new 52-week low amid heavy selling. Finally, Bristol-Meyers Squibb (NYSE:BMY) was flooded with activity amid news of its purchase of Celgene (NASDAQ:CELG).

Let’s take a closer look:

Apple (AAPL)

Apple shares ended the day bruised and battered after lowering their revenue guidance by $9 billion for the quarter. Tepid demand from China and longer upgrade cycles were cited as causes for the lackluster performance.

By day’s end, the ailing tech titan lost another 10% of value bringing its total bear market losses to 39%. The damage weighed heavily on the Nasdaq, with semiconductors leading the descent.

Caution is warranted for bottom fishers. With the stock steeped in a downtrend and making a lower low, we’ve yet to see any signs of a bullish reversal.

On the options trading front, calls actually came out on top despite the dramatic beatdown. Activity swelled to 222% of the average daily volume, with 1,372,793 total contracts traded. Calls contributed 52% to the day’s total.

The increased demand drove implied volatility higher to 44%, placing it at the 81st percentile of its one-year range. Premiums are now pricing in daily moves of $3.90 or 2.7%.

American Airlines (AAL)

American Airlines shares descended to a new 52-week low intraday. News was noticeably absent so I’m chalking the price slide and mad dash for puts as a technically driven event.

AAL was locked in a downtrend for almost all of 2018, leaving little reason for optimism heading into the new year. Until we see the stock reclaim the high side of its 200-day moving average, sellers remain in full control.

On the options trading front, puts outpaced calls by a wide margin. Total activity ramped to 173% of the average daily volume, with 68,923 total contracts traded. 74% of the trading came from put options alone.

The increased demand drove implied volatility higher on the day to 59%, placing it at the 78th percentile of its one-year range. Premiums are pricing in daily moves of $1.11 or 3.7%.

Bristol-Myers Squibb (BMY)

While Apple stole the limelight yesterday, big news was made in the healthcare space. New York city-based Bristol-Myers Squibb bought Celgene for $74 billion. The purchase involves cash and stock as follows. Celgene shareholders will receive one share of BMY and $50 in cash for each CELG share.

CELG stock soared on the announcement while BMY fell 13.3%.

On the options trading front, traders came after calls with a vengeance. Activity ballooned to 3,109% of the average daily volume, with 374,502 total contracts traded. 64% of the trading came from call options alone.

Implied volatility jumped to 40%, placing it at the 73rd percentile of its one-year range. Premiums are pricing in daily moves of $1.13 or 2.5%.

As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

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