Friday’s Vital Data: Apple, Micron Technology and Advanced Micro Devices

Options activity provides a look at expectations on AMD, MU and AAPL

Heading into the open, U.S. stock futures on the Dow Jones Industrial Average are down 0.57% and S&P 500 futures are lower by 0.46%. Nasdaq-100 futures have shed 0.39%.

Friday's Vital Data: Apple (AAPL), Micron Technology (MU) and Advanced Micro Devices (AMD)Thursday’s stock surge sent market bulls into the options pit to binge on call options. They outdistanced puts by a mile as overall volume levels climbed well above average. About 21.7 million calls and 17.3 million puts changed hands on the session.

The dash for calls was enough to push the CBOE single-session equity put/call volume ratio to a new low for 2019 at 0.51. This is undoubtedly an extreme reading for the measure reflecting panic buying and suggests the market rally may need to cool off a bit. This morning’s down gap may be the start of that cooling.

Options traders went bananas over tech stocks yesterday. Micron Technology (NASDAQ:MU) rocketed higher after releasing earnings that surpassed the Street’s expectations. Apple (NASDAQ:AAPL) benefited from an analyst upgrade. Finally, momentum traders continued bidding Advanced Micro Devices (NASDAQ:AMD) to the moon.

Let’s take a closer look:

Micron Technology (MU)

The resurrection in chip stocks has been a sight to behold. Fueled by an earnings release that topped analysts’ expectations, Micron joined the bullish spree with a 9.6% surge.

MU reported earnings of $1.71 per share on revenue of $5.84 billion. Both measures came in dramatically below the same quarter a year ago but surpassed the Street’s estimates nonetheless.

Given the strength of the surge, MU eclipsed the 200-day moving average for the first time since last September. Its short- and intermediate-term trends continue to point higher, and the semiconductor industry remains one of the hottest in the market right now.

And that makes buying MU stock into weakness over the coming days an attractive proposition.

On the options trading front, calls slightly outpaced puts on the day, though perhaps not at the margin you would have expected given the stock’s monster price rally. Activity zoomed to 378% of the average daily volume, with 555,185 total contracts traded. Calls accounted for 55% of the take.

With earnings and mass uncertainty now in the rearview mirror, implied volatility deflated dramatically. It fell to 39%, which places it at the ninth percentile of its one-year range. Ahead of earnings, the anticipated move for the reaction was 7%, so Thursday’s 9.6% pop landed outside of expectations.

Apple (AAPL)

The buying in Apple reached a fever pitch Thursday after Needham analyst Laura Martin upgraded the firm’s rating to strong buy and lifted the price target from $180 to $225. By day’s end, AAPL stock was up 3.7% to a fresh four-month high. It is also now back above the oft-watched 200-day moving average for the first time since November.

This year’s recovery has been almost as orderly as the fourth quarter’s destruction. In the short run, AAPL has become overbought and could use some digestion. However, there’s no doubt the tech titan is a rousing buy on any weakness that may emerge.

On the options trading front, calls ruled the day as total activity grew to 350% of the average daily volume, with 1,417,603 total contracts traded. 66% of the trading came from call options alone.

The increased demand drove implied volatility higher on the day to 26% placing it at the 32nd percentile of its one-year range. Premiums are now pricing in daily moves of $3.14 or 1.6%.

Advanced Micro Devices (AMD)

This week’s rocket ship rise in Advanced Micro Devices has officially reached dizzying heights. Even degenerate momentum traders have to be impressed by the eye-popping three-day 20% run. The magic that made AMD one of the most loved stocks by growth seekers last year has returned.

As mentioned previously, the cause for the excitement was the news that Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is using AMD chips in their new gaming service, Stadia.

The high volume accompanying this week’s ramp confirm the breakout’s validity and staying power. While I’d caution against chasing at these lofty levels, pullbacks have to be viewed as buying opportunities.

Traders went gaga over calls yesterday. The groundswell in demand lifted activity to 294% of the average daily volume, with 671,958 total contracts traded. Calls added 69% to the tally.

The demand surge was enough to bump implied volatility to 55%, which places it at the 29th percentile of its one-year range. Premiums are now baking in daily moves of 97 cents, or 3.5%.

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.

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