U.S. stock futures are trading slightly lower this morning after the S&P 500 scored its fifth straight up day.
Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.28% and S&P 500 futures are lower by 0.34%. Nasdaq-100 futures have lost 0.41%.
In the options pits, the popularity contest between calls and puts ended in a tie. Specifically, about 16 million calls and 16.2 million puts changed hands on the session.
At the CBOE, the single-session equity put/call volume ratio rose slightly to 0.65 — a one-week high. Meanwhile, the 10-day moving average held its ground at in three-month low territory at 0.62.
Retail stocks dominated options activity on Thursday. Bed Bath and Beyond (NASDAQ:BBBY) roared higher after reporting better-than-expected earnings. Macy’s (NYSE:M) crashed after slashing their earnings forecast. Finally, Netflix (NASDAQ:NFLX) is receiving more love after another analyst upgrade.
Let’s take a closer look:
Bed Bath & Beyond (BBBY)
We’re finally getting our first look at Q4 earnings in the retail space. Bed Bath and Beyond stepped up to the plate yesterday and scored big time with better-than-expected earnings and upbeat 2019 guidance. By the closing bell, BBBY stock had risen 16.6% amid heavy trading.
The earnings beat brings much-needed relief to a stock that has beaten mercilessly. All told, BBBY was down 85% from its 2013 peak heading into Thursday’s event. With the short-term trend now pointing higher, look for the stock to continue climbing toward the 200-day moving average near $17.
On the options trading front, puts outpaced calls by a wide margin despite the massive price rally. Total activity exploded to 1,604% of the average daily volume, with 266,394 total contracts traded. 64% of the trading came from call options.
With earnings out of the bag, implied volatility cratered on the day to 68%, dropping it to the 45th percentile of its one-year range. Premiums are now pricing in daily moves of 61 cents, or 4.3%. Options were pricing in a move of $2.27 into the quarterly release, so yesterday’s $2.02 jump higher, though robust, was still within the expected move.
Macy’s surprised the Street with an unscheduled announcement surrounding their sales performance in Q4. And M stock was summarily punished, suffering its biggest intraday decline since the financial crisis of 2008. The losses were pared slightly by the closing bell, but Macy’s still finished down 17.7%.
The company cited a mid-December slowdown in sales as the culprit for the reduction in annual profit expectations. They trimmed their forecast for annual profits from around $4.30 to $4. Comparable sales expectations were also slashed from 2.3% to 2%.
On the options trading front, put popularity won the day. Total activity ended at 565% of the average daily volume, with 142,012 total contracts traded. Puts accounted for 54% of the day’s take.
Implied volatility dripped lower to 46%, placing it at the 48th percentile of its one-year range. Premiums are pricing in daily moves of 76 cents, or 2.9%.
With Netflix shares on the mend, analysts are starting to throw some affection its way. Raymond James analyst Justin Patterson upgraded the stock from outperform to strong buy and hiked his price target to $435.
Meanwhile, UBS analyst, Eric Sheridan lift his rating to buy from neutral while raising his price target to $410. NFLX stock is currently up 2% in premarket trading. The company’s next earnings release is just around the corner on Jan. 17.
On the options trading front, excitement over calls and puts was virtually split 52% to 48%. Activity lifted slightly to 109% of the average daily volume, with 186,472 total contracts traded.
Implied volatility ticked higher on the day to 63% placing it at the 71st percentile of its one-year range. Premiums are pricing in daily moves of $12.90 or 4%.
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.