U.S. stock futures are circling unchanged this morning as traders take a breather following yesterday’s fresh highs in the Nasdaq-100 and S&P 500.
Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.05%, and S&P 500 futures are lower by 0.04%. Nasdaq-100 futures have added 0.01%.
In the options pits, the dash to record highs generated increasing volumes. As you might expect, calls led the bulls’ charge. Specifically, about 20 million calls and 15.1 million puts changed hands on the session.
Meanwhile, over at the CBOE, the single-session equity put/call volume ratio remains as uninspiring as ever. It slipped to 0.59 but continues to fiddle in the middle of 2019’s range. The 10-day moving average matched the action by falling to 0.59.
Options activity was juiced in the following stocks. Coca-Cola (NYSE:KO) popped on earnings after topping expectations. Qualcomm (NASDAQ:QCOM) added to its large gains following its surprise settlement with Apple (NASDAQ:AAPL). Finally, Microsoft (NASDAQ:MSFT) calls were hot ahead of tonight’s earnings announcement.
Let’s take a closer look:
Coca-Cola released its first-quarter earnings before the bell Tuesday and beat expectations. Adjusted earnings grew to 48 cents per share, beating estimates by 2 cents. And revenue climbed to $8.02 billion, handily beating forecasts for $7.9 billion.
KO stock saw a volatile session, ultimately ending up 1.75% on the day. The jump lands it square in the middle of last quarter’s earnings gap, which should continue to fill. Look for KO to return to $50 in the coming days.
On the options trading front, traders came after calls like sugar-deprived kids to soda. Activity fizzed to 424% of the average daily volume, with 113,617 total contracts traded; 82% of the trading came from call options alone.
The 1.75% price jump fell well within market expectations. Premiums were baking in a 3.1% move on earnings, so chalk this up as a win for volatility sellers. The post-earnings volatility crush was on full display, driving the metric down to 15% or the 19th percentile of its one-year range.
The rocket ship ride in Qualcomm continued in earnest, adding another 5.8% to its already immense gains. QCOM stock now sits at 19-year highs and is well on its way to revisiting its record peak of $100 reached during the dot-com craze.
Traders favoring low-risk, high-reward setups should steer clear of QCOM right now. It’s a momentum-drive move that is now extremely overbought. A pause or pullback would allow the stretched conditions to ease and lower-risk entries to develop.
As far as options trading goes, the Street continues to heavily favor call options. The volume explosion continued on Tuesday with activity ramping to 409% of the average daily volume. By day’s end, the total contracts traded eclipsed the half a million mark at 509,837 contracts traded. Calls claimed 67% of the sum.
Implied volatility inched higher to 39% placing it at the 73rd percentile of its one-year range. Premiums are pricing in daily moves of $2.14 or 2.5%. Qualcomm’s earnings report is slated for May 1.
The current stage of our bull market has the Nasdaq-100 to thank. And although many tech stocks are throwing their weight behind the Nasdaq’s dominance, it’s Microsoft that has arguably been the most consistent helper.
MSFT stock set yet another record high yesterday. With the 1.5% rise, its year-to-date gains have now grown to 24%. Its price trend is a beauty, complete with rising moving averages across all time frames. Accumulation days litter the landscape with nary a whiff of distribution. You bet against buyers at your peril here.
The theme of call popularity continued with MSFT. Total activity ended at 219% of the average daily volume, with 290,811 contracts traded. Calls accounted for 75% of the day’s take.
Implied volatility remains subdued despite the looming earnings announcement set for tonight. Option premiums are baking in a $3.66 or 2.9% move.
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.