Wednesday’s Vital Data: Proctor & Gamble, UnitedHealth Group and Qualcomm

Options activity provides a look at expectations on PG, UNH and QCOM stock

U.S. stock futures are climbing in early morning trading.

Wednesday's Vital Data: Proctor & Gamble, UnitedHealth Group and Qualcomm; options trading
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Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.19%, and S&P 500 futures are higher by 0.27%. Nasdaq-100 futures have added 0.52%.

With record highs a stone’s throw away, bullish option flows continue to suggest a retest is on the horizon. In the options pits, call activity surged yesterday, pushing overall volume back above average readings. Specifically, about 20.2 million calls and 14.8 million puts changed hands on the session.

Meanwhile, the action at the CBOE mirrored that of the previous day with the single-session equity put/call volume holding steady at 0.58. The 10-day moving average remains at 0.59.

Options traders flocked to the following three stocks: Proctor & Gamble (NYSE:PG), UnitedHealth Group (NYSE:UNH) and Qualcomm (NASDAQ:QCOM).

Let’s dig into the details:

Proctor & Gamble (PG)

The drumbeat of new highs continued for Proctor & Gamble on Tuesday. With the day’s gains, the consumer staples stock pushed its year-to-date gains to 15.9%. Chart watchers continue to salivate over the consistency of its uptrend. The series of higher highs and lows has been relentless in 2019, and all major moving averages are rising beneath.

Despite the substantial rise, PG stock still boasts a meaty dividend at 2.82%, and it is the allure of cash flow that landed the company atop yesterday’s leaderboard. Traders harnessed the power of call options for short-term control of PG stock ahead of Wednesday’s ex-dividend date. Its next quarterly dividend payment of 74.6 cents will be paid to shareholders.

As is usually the case ahead of dividend dates, options traders went cuckoo for call options.

On the options trading front, traders came after calls with a vengeance. Activity exploded to 1,232% of the average daily volume, with 204,899 total contracts traded; 85% of the trading came from call options alone.

Implied volatility drifted sideways on the session at 20%, which places it at the 40th percentile of its one-year range. Premiums are baking in daily moves of $1.37 or 1.3%.

UnitedHealth Group (UNH)

Traders played whack-a-mole with UNH stock after the healthcare company reported first-quarter earnings that surpassed expectations. UnitedHealth raked in $3.60 of earnings-per-share on revenue of $60.31 billion. Both metrics topped analyst forecasts.

And yet, the early morning gains melted as the recent proposals for “Medicare-for-all” by some Democrats running for president took root. Here’s the money quote from CEO David Wichmann during the company’s conference call: “The wholesale disruption of American health care would surely jeopardize the relationship people have with their doctors, destabilize the nation’s health system, and limit the ability of clinicians to practice medicine at their best.”

UNH stock ended down 4.12% on the session, falling to a new 52-week low.

On the options trading front, calls ruled the roost despite the early-morning rug pull. Activity grew to 881% of the average daily volume, with 160,336 total contracts traded. Calls claimed 65% of the total.

The typical “volatility crush” in implied volatility following earnings was held at bay by the high uncertainty that came out of the conference call. Implied volatility remains sky high at 34% or the 73rd percentile of its one-year range. Traders continue to expect daily moves of $4.69 or 2.1%.

Qualcomm (QCOM)

An unexpected settlement to Qualcomm’s multi-year legal battle with Apple (NASDAQ:AAPL) was announced yesterday, and the chipmaker is zooming to the moon. When the news hit the wires, QCOM stock rocketed 20% higher. The buying has continued unabated in after-hours trading, and QCOM is up another 12%. That means it will open at a new four-and-a-half year high.

The only resistance level that remains between Qualcomm and new record highs is the 2014 peak of $81.97. And with the rapid repricing going on over the past 24 hours, the stock could get there in a hurry.

As you might expect, calls dominated the day by a large margin. Total activity climbed to 492% of the average daily volume, with 361,393 contracts traded; 80% of the day’s take fell on the call side of the ledger.

Implied volatility dropped to 34% placing it at the 56th percentile of its one-year range. Premiums are pricing in daily moves of $1.52 or 2.2%

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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