Thursday’s Vital Data: Facebook, AT&T and Snap

Options activity provides a look at expectations on FB, SNAP and T stock

U.S. stock futures are trading mixed this morning. Strong earnings reports out of the tech sector are buoying the Nasdaq-100 while dismal releases from industrials are weighing on the Dow Jones Industrial Average.

Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.26%, and S&P 500 futures are higher by 0.12%. Nasdaq-100 futures have added 0.37%.

With the market rally resting yesterday, volumes receded in the options pit. Calls once again led the way showing a continuation in the complacency which has permeated the uptrend. Specifically, about 18.8 million calls and 14.7 million puts changed hands on the session.

Meanwhile, the CBOE single-session equity put/call volume ratio remained as dull as ever by hovering near 0.60 yet again. The 10-day moving average shares the same level at 0.60.

Options traders zeroed in on earnings reports yesterday from the following companies: Facebook (NASDAQ:FB), Snap (NYSE:SNAP) and AT&T (NYSE:T).

Let’s take a closer look:

Facebook (FB)

Facebook is flying high this morning following an earnings release that topped expectations. For the first quarter, the social media giant earned $1.89 per share on revenue of $15.08 billion. The street was expecting earnings of $1.63 on sales of $14.97.

Buyers are swarming to drive FB stock up just shy of 9% premarket. The up-gap places it within striking distance of last year’s $218.62 high. As far as the price trend goes, it was bullish heading into earnings and will be even more so coming out of it.

On the options trading front, traders favored calls on the session. Activity swelled to 223% of the average daily volume, with 534,627 total contracts traded; 63% of the trading came from call options.

Option premiums were baking in a 5.3% move post-earnings, so this morning’s 9% surge lands well outside of expectations and will bring big profits to traders holding long volatility trades like straddles into the event.

AT&T (T)

AT&T’s budding 2019 recovery came to an abrupt end yesterday after the company failed to impress investors with its first-quarter performance. The telecom titan raked in 86 cents in adjusted earnings-per-share which matched analyst forecasts. Revenue came in light, however, at $44.8 billion. The FactSet consensus was targeting $45.1 billion.

By day’s end, T stock had fallen 4.1% amid heavy profit-taking. The descent takes AT&T shares back below all major moving averages and places it on precarious footing. Until buyers can right the ship, I suggest steering clear of bullish plays.

On the options trading front, calls won the popularity contest despite Wednesday’s drubbing. Activity lifted to 290% of the average daily volume, with 276,180 total contracts traded. Calls claimed 61% of the take.

Ahead of the number, options were pricing in a 3.4% move. That makes the 4.1% whack only slightly outside of expectations and likely means neither volatility buyers or sellers ahead of the release are leaving victorious.

Snap (SNAP)

Volatility seized Snap shares after the Snapchat parent reported earnings. The initial up gap was immediately rejected amid massive selling pressure that sent the stock skidding on the day. By the closing bell, SNAP stock was down 6.1%.

The nasty bearish engulfing candle is jeopardizing this year’s uptrend. Support is holding for now, but a breakdown remains a whisper away. Watch the 50-day moving average at $10.64 for your tell. If SNAP falls below it, watch out below.

On the options trading front, calls outpaced puts by a modest margin. Total activity ramped to 308% of the average daily volume, with 364,703 contracts traded. The ratio of calls to puts was 62% vs. 38%.

Implied volatility deflated throughout the day to end at 55% and places it at the 27th percentile of its one-year range. Premiums are now baking in daily moves of 39 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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