Friday’s Vital Data: Tesla, Roku and Disney

U.S. stock futures are trading well into the green after the job market rebounded in March adding 196k in nonfarm payrolls.

stock market todayAhead of the bell, futures on the Dow Jones Industrial Average are up 0.36% and S&P 500 futures are higher by 0.29%. Nasdaq-100 futures have added 0.41%.

In the options pits, the action left little to chatter about which is often the case when volatility is subdued, and prices drift. Overall volume ended near average levels with about 17.6 million calls and 13.7 million puts changing hands on the day.

The extreme readings in the CBOE single-session equity put/call volume ratio did cool yesterday. It popped back up to 0.59 while the 10-day moving average climbed to 0.63.

Options traders were particularly active in Tesla (NASDAQ:TSLA), Roku (NASDAQ:ROKU) and Disney (NYSE:DIS).

Let’s take a closer look:

Tesla (TSLA)

Disappointing delivery numbers took Tesla out at the knees Thursday. The company reported it delivered 50,900 Model 3 cars in Q1 which fell well short of the expected 52,450 that analysts were anticipating.

Traders were quick to punish TSLA stock. A flurry of sell orders at the open created a 10.3% down gap amid heavy volume. By day’s end, buyers did emerge to pare the losses to 8.2%. To chart watchers, the continued weakness in Tesla shares shouldn’t be surprising. The magnitude maybe, but not the direction. The stock has been locked in a downtrend all year long, complete with falling 50-day and 20-day moving averages. That said, significant support looms close at $250 so expect bulls to put up a staunch defense.

On the options trading front, puts outpaced calls on the session. Activity swelled to 241% of the average daily volume, with 499,763 total contracts traded. Puts added 54% to the tally.

Implied volatility fell on the day to 67%. That places it at the 40th percentile of its one-year range. The expected daily moves for the stock now sit at $11.32, or 4.2%.

Roku (ROKU)

Roku shares slid 6% after a Guggenheim analyst downgraded the stock from buy to neutral. The firm also lowered its price target from $77 to $72. Here’s the money statement explaining the reasoning for their pessimism:

“We believe that the Apple video product unveiled on March 25 represents an additional risk to Roku’s active user base (even as the platform includes The Roku Channel) while Amazon’s and Viacom’s greater pushes into advertising video on demand (AVOD) are increasing competition.”

Given the stock’s meteoric rise this year (it was up as much as 143%) you can’t fault analysts for lowering expectations and wondering how much of the company’s growth is already baked into the price. Despite the drubbing, ROKU stock remains in an intermediate-term uptrend with a rising 50-day moving average. The critical level to watch is support at $60. If we break it, watch out below.

As far as options activity goes, the price drop was enough to push put demand higher than calls. By day’s end, the total activity grew to 216% of the average daily volume, with 149,795 total contracts traded.

Implied volatility jumped to 74%, placing it at the 53% percentile of its one-year range. Premiums are officially juiced and ripe for the selling. Short option strategies are very compelling here.

Disney (DIS)

Optimism from Goldman Sachs (NYSE:GS) boosted Disney shares 2% on Thursday after the investment bank reinstated its rating on Disney as “buy.”

Shares of the House of Mouse have been mired in the mud with little to show for its efforts over the past year. The $110 price level is acting as a powerful magnet, and despite numerous attempts, DIS has been unable to escape its grasp. Thursday’s rally does look promising though. If it can clear resistance at $115.50, we could see a return to the record high at $120.20.

Goldman’s bullish chatter lit a fire under calls for the day. Activity grew to 176% of the average daily volume, with 159,656 total contracts traded. 65% of the sum came from call options.

Implied volatility sits at 24% or the 36th percentile of its one-year range. Premiums are baking in daily moves of $1.72 or 1.5%.

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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