U.S. stock futures are crawling lower this morning. If the early weakness is reversed and the S&P 500 can close green today, it will be the ninth up day in a row.
Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.26%, and S&P 500 futures are lower by 0.26%. Nasdaq-100 futures have shed 0.27%.
Put volume all but disappeared in the options pits yesterday. With eight consecutive up days, fear has officially left the building. Specifically, about 16.2 million calls and 11.7 million puts changed hands on the session.
Curiously, the dramatic drop in put activity didn’t translate over to the CBOE, where the single-session equity put/call volume ratio lifted to 0.68 — a two-week high. The 10-day moving average continues to drift at 0.62.
Here are three of the hottest stocks in the options market. New Age Beverages (NASDAQ:NBEV) surged 39% after announcing a national distribution deal with Walmart (NYSE:WMT). Boeing (NYSE:BA) gapped lower after reporting production cuts amid the ongoing fallout from the recent crashes of its 737 MAX aircraft. Finally, Roku (NYSE:ROKU) slipped 4.2% after a Citi analyst downgraded the company on valuation worries.
Let’s take a closer look:
New Age Beverages (NBEV)
New Age Beverages made its first appearance atop the most-active options board Monday on news that Walmart will begin offering its Marley Mate drink. The natural beverage company surged 39% on 66 million shares amid widespread euphoria over the deal, which is the company’s first involving national distribution.
On the price front, NBEV now sits atop all major moving averages. Shareholders are hoping Monday’s moonshot is the catalyst for a new uptrend. $7.80 and $9 are the next two upside targets. Both levels acted as strong overhead resistance over the past year.
In the liquidity department, NBEV stock options are quite active. It has Weeklys available and large enough open interest to make it a viable trading candidate. Call volume exploded yesterday. Activity ballooned to 1,200% of the average daily volume, with 105,502 total contracts traded. 78% of the trading came from call options alone.
The news breathed new life into implied volatility, which had been dwindling near its one-year low. By day’s end, it had jumped from 83% to 108%.
Boeing (BA)
Two negative news items conspired to upend last week’s recovery attempts in Boeing shares. The struggling airliner fell 4.4% on Monday after admitting fault in the two recent crashes of its 737 Max airplane. Additionally, they announced a reduction in their production schedule from 52 planes per month to 42.
Here are the two key quotes from the company’s press release on Friday after the bell.
“We now know that the recent Lion Air Flight 610 and Ethiopian Airlines Flight 302 accidents were caused by a chain of events, with a common chain link being erroneous activation of the aircraft’s MCAS function.”
“We have decided to temporarily move from a production rate of 52 airplanes per month to 42 airplanes per month starting in mid-April,”
On the options trading front, activity wasn’t as elevated as I would have thought. The total grew to 113% of the average daily volume, with 232,663 total contracts traded. Puts only accounted for 46% of the total.
The increased demand drove implied volatility higher on the session to 33%, placing it at the 45th percentile of its one-year range. Premiums are pricing in daily moves of $7.90, or 2.1%.
Roku (ROKU)
This year’s meteoric rise in Roku was bound to overheat. Such is the fate of all stocks that fly too close to the sun. The latest news taking a bite out of its recent gains was an analyst downgrade from Citi. Mark May downgraded the stock to sell and dropped his price target from $53 to $50. Compared to ROKU stock’s closing price of $60.73, that marks an 18% reduction.
Mr. May’s worries were centered around the stock’s sky-high valuation and increased competition in streaming video by Apple (NASDAQ:AAPL) and Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL).
The down gap resulted in the first test of ROKU’s 50-day moving average since this year’s ascent began. Fortunately, buyers emerged to defend their turf, and the stock ended with a bullish hammer candle.
On the options trading front, calls outpaced puts despite the day’s thrashing. Activity climbed to 136% of the average daily volume, with 98,956 total contracts traded. 53% of the trading originated with calls.
The ongoing rise in implied volatility has now lifted the reading into overpriced territory. At 78% it sits at the 59th percentile of its one-year range. Pumped-up premiums are now baking in daily moves of $3 or 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.
