Friday’s Vital Data: Starbucks, Freeport McMoRan and PG&E

Options activity provides a look at expectations on SBUX, FCX, PCG

U.S. stock futures are trading sharply higher this morning as buyers attempt to wrest control ahead of the weekend.

Friday's Vital Data: Starbucks (SBUX), Freeport McMoran (FCX) and PG&E (PCG)Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.83% and S&P 500 futures are higher by 0.87%. Nasdaq-100 futures have added 1.18%.

In the options pits, call volume outpaced puts by a modest margin, even as overall volume held steady near average levels. Specifically, about 15.5 million calls and 14.5 million puts changed hands on the session.

Moving to the CBOE, the single-session equity put/call volume ratio rose to 0.72 — a two-week high. Meanwhile, the 10-day moving average ticked higher to 0.64.

Earnings reports continued to dominate options activity yesterday. Starbucks (NASDAQ:SBUX) options activity surged ahead of last night’s earnings report. Freeport-McMoRan (NYSE:FCX) plunged after releasing terrible fourth-quarter numbers. Finally, PG&E (NYSE:PCG) was flooded with activity after California state regulators declared the company was not responsible for the 2017 Tubbs Fire.

Let’s take a closer look:

Starbucks (SBUX)

Starbucks got a little slippery ahead of last night’s earnings report. The ubiquitous coffee company fell 5.3% intraday before paring back its losses into the close. The anxiety turned out to be all for naught because SBUX delivered better-than-expected earnings. Traders are rewarding the company with a 4%-plus gain in premarket trading.

Earnings per share came in at 75 cents compared to estimates of 68 cents per share. Revenue for the quarter grew to $6.63 billion topping estimates of $6.49.

On the options trading front, calls won the popularity contest. Activity climbed to 531% of the average daily volume, with 187,709 total contracts traded. Calls added 54% to the day’s tally.

Pre-earnings jitters drove implied volatility higher on the day to 36%, placing it at the 100th percentile of its one-year range. The options board was pricing in an expected earnings move of $4.27, or 6.6%. With SBUX stock trading $2.86 higher (4.4%) this morning, the gap is arriving well inside of expectations.

Freeport-McMoRan (FCX)

Freeport-McMoRan stepped up to the earnings plate Thursday morning and whiffed mightily. The stock was summarily punished with a massive 13.1% decline amid heavy volume.

For the fourth quarter, FCX earned 9 cents per share on revenue of $3.68 billion. The Street was expecting earnings per share of 21 cents on $3.85 billion in revenue.

On the options trading front, calls dominated the session despite the massive selloff. By the end of the session, activity rose to 270% of the average daily volume, with 123,445 total contracts traded. 59% of the trading came from call options.

Option premiums were only pricing in a move of 32 cents, or 2.6%, so yesterday’s $1.61 shellacking blew expectations out of the water. The outsized jump serves as a good reminder that stocks sometimes move way more than what’s priced in if the company releases a significant upside or downside earnings surprise.

PG&E (PCG)

PG&E shareholders finally received a bit of good news. California’s largest utility surged 75% on news that a state regulator found the company was not responsible for the 2017 Tubbs wildfire.

Previous to the news, PG&E shares were circling the drain due to massive losses from their exposure to the 2018 Camp Fire which was California’s most destructive wildfire ever.

On the options trading front, put volume led the charge. Activity swelled to 359% of the average daily volume, with 322,273 total contracts traded. Puts accounted for 57% of the day’s take.

Implied volatility remains sky-high, reflecting massive uncertainty for PCG moving forward. At 211%, the reading sits at the 76th percentile of its one-year range. Premiums are now pricing in daily moves of $1.85 or 13.3%.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2019/01/fridays-vital-data-starbucks-freeport-mcmoran-and-pge/.

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