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Wednesday’s Vital Data: JPMorgan Chase, Netflix and Twitter

Options activity provides a look at expectations on JPM, NFLX and TWTR

By Tyler Craig, Tales of a Technician

http://bit.ly/2SWLNUX

U.S. stock futures are trading higher in early morning trading following stronger-than-expected bank earnings. Goldman Sachs (NYSE:GS) and Bank of America (NYSE:BAC) both topped analyst estimates.

Wednesday's Options Trading Vital Data: JPMorgan Chase, Netflix and TwitterAhead of the bell, futures on the Dow Jones Industrial Average are up 0.46% and S&P 500 futures are higher by 0.3%. Nasdaq-100 futures have added 0.18%.

In the options pits, call volume outpaced puts even as overall volume remained near average levels. Specifically, about 16.9 million calls and 15.3 million puts changed hands on the session.

At the CBOE, the single-session equity put/call volume ratio rose to 0.70. Meanwhile, the 10-day moving average climbed to 0.66.

Here were three stocks with elevated options activity. JPMorgan Chase (NYSE:JPM) saw renewed options interest after reporting earnings. Netflix (NASDAQ:NFLX) jumped 6.5% to extend an already impressive rally. Finally, Twitter (NYSE:TWTR) calls were buzzing during its price increase.

Let’s take a closer look:

JPMorgan Chase (JPM)

After gapping lower in response to its earnings release, JPMorgan shares rallied back to unchanged and then some. The financial giant reported its first earnings miss in 15 straight quarters, so its ability to rally in the face of seemingly disappointing results is a bullish omen.

With many stocks being laid low after last quarter’s market crash, the downshift in earnings may have been adequately priced in. If one day is any indication, that seems to be the case with JPM stock.

In the near-term, key resistance looms overhead at $103, so JPM will need to power through it before officially reversing its downtrend.

On the options trading front, calls won the day. Total activity increased to 242% of the average daily volume, with 151,455 total contracts traded. 62% of the trading came from call options.

The release of earnings drove implied volatility into the ground. By day’s end, it had fallen to 23%, placing it at the 25th percentile of its one-year range. Premiums are now pricing in daily moves of $1.44, or 1.4%.

Netflix (NFLX)

The relentless recovery in Netflix continued on Monday with a 6.5% gain. All told, the entertainment giant has risen 53% from its lows. And that has been in less than one month! When NFLX steps up to the earnings plate tomorrow, we will see if the mammoth rally is justified.

To be fair, the stock has simply returned to the level it sat at following the last earnings release.

On the options trading front, calls slightly outpaced puts. Total activity swelled to 134% of the average daily volume, with 246,758 total contracts traded.  Calls accounted for 55% of the day’s take.

Implied volatility fell to 56%, placing it at the 60th percentile of its one-year range. Premiums are pricing in a $25.70 move after earnings, which translates into a potential 7.2% gap.

Twitter (TWTR)

Twitter shares remain mired in a six-month trading range. But yesterday’s rally was accompanied by an uptick in options activity, making it worthy of mention.

All was quiet on the news front, so I’m chalking the 2% rally up as a technically driven event and nothing more. Unfortunately, there isn’t anything of note on the price chart right now either. Until TWTR stock finally powers above resistance at $36 it’s essentially range-bound.

On the options trading front, calls dominated the session. Total activity climbed to 151% of the average daily volume, with 143,792 total contracts traded. Calls added 65% to the day’s tally.

Implied volatility dipped on the day to 63%, placing it at the 55th percentile of its one-year range. Premiums are pricing in daily moves of $1.32, 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.


Article printed from InvestorPlace Media, https://investorplace.com/2019/01/wednesdays-vital-data-jpmorgan-chase-netflix-and-twitter/.

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