Tuesday’s Vital Data: Coca-Cola, Canopy Growth Corp and Nvidia

Options activity provides a look at expectations on KO, CGC and NVDA

U.S. stock futures are trading lower this morning after the Dow Jones Industrial Average notched its eighth straight up week in a row. With the relentless recovery, some stock indexes are now within striking distance of their prior peaks.

Tuesday's Vital Data: Coca-Cola (KO), Canopy Growth Corp (CGC) and Nvidia (NVDA)Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.23% and S&P 500 futures are lower by 0.29%. Nasdaq-100 futures have shed 0.29%.

Friday’s market rally lit a fire under call demand and helped drive overall volume to above-average levels. Specifically, about 23.3 million calls and 17.5 million puts changed hands on the session.

The euphoric dash for calls made waves at the CBOE with the single-session equity put/call volume ratio plunging to 0.52 — a one-month low. Meanwhile, the 10-day moving average slipped to a four-month low.

Options activity was all about earnings on Friday. Coca-Cola (NYSE:KO) continued falling after missing revenue estimates and delivering poor 2019 guidance. Canopy Growth Corp (NASDAQ:CGC) reported sales growth that largely satisfied shareholders. Finally, Nvidia (NASDAQ:NVDA) jumped despite poor earnings, but the initial up-gap was aggressively sold.

Let’s take a closer look:

Coca-Cola (KO)

Weakness continued for the soda king on Friday, driving KO down just shy of 1% by day’s end. The stock gapped higher and saw early morning strength, but the rally ultimately fizzled on continued angst surrounding its poor earnings release. Earlier in the week, Coca-Cola reported numbers that missed revenue estimates. The forward guidance also disappointed.

With shares now beneath the 200-day moving average, sellers have full control here. The next two support zones are $44.50 and $41.50.

On the options trading front, calls dominated the session despite the slide. Total activity grew to 465% of the average daily volume, with 170,263 total contracts traded. Calls accounted for 78% of the day’s take.

With earnings out of the way, the day-to-day volatility should return to a more normal pace. Implied volatility sits at 17%, or the 34th percentile of its one-year range. Premiums are pricing in daily moves of 49 cents, or 1.1%.

Canopy Growth Corp (CGC)

The volatility in marijuana stocks continued on Friday, only this time it was an earnings-report-driving the drama. Canopy Growth Corp shares were up as much as 8.1% before the high finally wore off. By day’s end the gains were trimmed to 3.1%.

With the trend still pointing higher, CGC bulls remain in control. I see little reason to doubt their domination unless the stock takes out support at $41.

Not surprisingly, optimists took to the options market to express their enthusiasm. Activity jumped to 176% of the average daily volume, with 118,618 total contracts traded. 64% of the trading came from call options alone.

Expectations for movement were running hot into Friday’s session, so the 3.1% daily gain was kind of a dud. As such, traders crushed implied volatility driving it back down to 74%.

Nvidia (NVDA)

Nvidia reported earnings that reflected a massive slowdown in their business. Revenue and earnings for the fourth-quarter fell 24% and 48%, respectively. But there is a silver lining. While the results where terrible, the market was expecting horrific. So in a world where it’s all about expectations versus reality, the numbers were good enough to deliver a 1.8% gain on the day.

Looking at the close-to-close move is a bit misleading, however, because NVDA initially gapped up 5.4%, so this was undoubtedly a sell the news reaction. I suggest waiting for the stock to settle before trading it.

Calls won the popularity contest on Friday. Total activity swelled to 206% of the average daily volume, with 485,943 total contracts traded. 59% of the total came from the call side.

Implied volatility experienced the typical post-earnings crush, falling to 41% on the day. That places it at the 34th percentile of its one-year range. Premiums are pricing in daily moves of $4.11, or 2.6%.

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/2019/02/tuesdays-vital-data-coca-cola-canopy-growth-corp-and-nvidia/.

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