U.S. stock futures are trading mixed this morning following an unexpected earnings miss from banking giant J.P. Morgan (NYSE:JPM). This marks the first time in 15 quarters that JPM has fallen short of earnings estimates.
Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.07% and S&P 500 futures are higher by 0.13%. Nasdaq-100 futures have added 0.42%.
In the options pits, put volume climbed above call volume even as overall activity levels remained subdued. Specifically, about 14.4 million calls and 15.4 million puts changed hands on the session.
However, those puts didn’t translate over to the CBOE, where the single-session equity put/call volume ratio fell back to 0.65. Meanwhile, the 10-day moving average climbed further to 0.65.
Here were three stocks atop the most-actives list yesterday. Macy’s (NYSE:M) continues to see large put volumes in the aftermath of its announcement slashing its profit forecast. Citigroup (NYSE:C) options were hot after yesterday’s earnings release. Finally, Bank of America (NYSE:BAC) saw an uptick in options trading ahead of Wednesday’s quarterly report.
Let’s take a closer look:
Macy’s (M)
Macy’s fell for a third straight day as sellers continue to dominate following last week’s announcement of weak holiday sales and a lowering of their profit forecasts for the fiscal year 2018. With Monday’s slide, M stock’s year-to-date losses have now grown to 16%.
From a charting perspective, there isn’t much positive to highlight. Sellers are dominating the landscape and now control both the short-term and intermediate-term trends. As such, any strength in the stock over the coming days will create attractive entries for bear trades.
On the options trading front, traders came after puts with a vengeance. Total activity swelled to 577% of the average daily volume, with 189,336 total contracts traded. 77% of the trading came from put options alone.
The increased demand drove implied volatility higher, halting the post-earnings volatility crush. With implied volatility at 42%, it now sits at the 38th percentile of its one-year range. Premiums are now pricing in daily moves of 67 cents or 2.7%.
Citigroup (C)
Investors got their first look at how banks performed last quarter yesterday with Citigroup earnings. Despite reporting mixed results, Wall Street rewarded C stock with a solid 4% gain. The company said they raked in $1.61 of earnings per share on revenue of $17.1 billion. Analysts had been expected earnings of $1.55 per share on revenue of $17.59 billion.
With yesterday’s gains, Citigroup shares are now testing the underside of the declining 50-day moving average. This remains a precarious spot to deploy bullish plays, so I suggest waiting for a better entry if you’re considering long trades.
On the options trading front, calls outpaced puts on the session. Total activity climbed to 209% of the average daily volume, with 224,014 total contracts traded. Calls accounted for 59% of the day’s take.
With earnings now in the rearview mirror, implied volatility sunk like a stone to 29%. It now sits at the 31st percentile of its one-year range and premiums are pricing in daily moves of $1.08 or 1.8%.
Bank of America (BAC)
The rally in Citigroup boosted financials across the board yesterday, including Bank of America. The stock was up 1.3% and saw a slight boost to its options trading. BAC is scheduled to report its earnings on Wednesday before the opening bell.
Bank of America’s chart remains in the midst of a V-shaped recovery. But with it now wrestling with multiple resistance zones and the quarterly report looming tomorrow it’s tough to make a case for a trade here.
On the options trading front, calls ruled the roost. Total activity ticked higher to 110% of the average daily volume, with 454,256 total contracts traded. Calls contributed 55% to the day’s tally.
Implied volatility slipped on the day to 31% as uncertainty fell ahead of Wednesday’s earnings release. Premiums are now pricing in an earnings move of 3% in the stock.
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.
