U.S. stock futures are sinking after Apple (NASDAQ:AAPL) unexpectedly lowered its revenue guidance for Q1 by almost $9 billion from the former high end. The company is blaming both a longer upgrade cycle and issues in China as catalysts for the drop. AAPL stock is trading 9% lower premarket.
Against this backdrop , futures on the Dow Jones Industrial Average are down 1.01% and S&P 500 futures are lower by 0.94%. Nasdaq-100 futures have lost 1.69%.
In the options pits, put volume jumped yesterday as the large gap lower led to a mad dash for protection. Specifically, about 14.9 million calls and 15.9 million puts changed hands on the session.
Over at the CBOE, the single-session equity put/call volume ratio rose to 0.67. Meanwhile, the 10-day moving average fell once more to 0.74.
Traders took aim at companies on the cusp of a dividend payout. JPMorgan (NYSE:JPM) and Cisco (NASDAQ:CSCO) both saw renewed options interest ahead of their respective ex-dividend dates. Finally, AT&T (NYSE:T) shares jumped 3.5% as buyers jumped in to get exposure to its tasty 7% dividend yield.
Let’s take a closer look:
JPM stock scored a rousing bullish engulfing candle as buyers rushed in to snatch up the early morning weakness. The gains returned JPM to its descending 20-day moving average, completing what could be a classic bear retracement pattern.
The most likely reason for today’s jump in options trading is traders jockeying for positions ahead of tomorrow’s quarterly dividend of 80 cents. With the recent downturn in the stock, JPMorgan now boasts a dividend yield of 3.2%.
On the options trading front, calls dominated the session. Total activity swelled to 176% of the average daily volume, with 109,517 total contracts traded. 78% of the trading came from call options.
Meanwhile, implied volatility continued its week-long slide falling to 39%, or the 70th percentile of its one-year range. Premiums are now pricing in daily moves of $3.93 or 2.5%.
Like the broader market, CSCO’s down gap was gobbled up. By day’s end, its large morning losses were pared considerably. Though, with its downtrend still fully intact and all major moving averages still pointing lower, you should view rallies with skepticism.
Traders took to the options market — specifically calls — for the right to buy the stock ahead of Thursday’s ex-dividend date. CSCO is slated to pay its 33 cents quarterly dividend to shareholders of record. At its current perch, Cisco trades with an annual dividend yield of 3.1%
On the options trading front, calls outpaced puts by a large margin. Total activity increased to 170% of the average daily volume, with 71,891 total contracts traded. Calls contributed 79% to the day’s take.
Implied volatility dipped to 35% placing it at the 69th percentile of its one-year range. Premiums are now pricing in daily moves of 95 cents or 2.2%
AT&T landed atop the biggest gainers list yesterday with an impressive 3.5% gain to kick off the new year. It had a terrible 2018, and with the dramatic discount now boasts a zesty 7% dividend yield.
As with its predecessors, the hyperactivity in T stock options was likely due in part to its upcoming dividend payout as well as its market-beating gains. The telecom giant’s next dividend payout of 51 cents is looming on January 9th.
On the options trading front, calls once again won the popularity contest. Total activity ramped to 147% of the average daily volume, with 149,025 total contracts traded. 65% of the total came from the call side.
Like its predecessors, implied volatility slipped on the day down to 31%, which places it at the 62nd percentile of its one-year range. Premiums are now pricing in daily moves of 58 cents or 1.96%
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.