Thursday’s Vital Data: Disney, Lyft and Electronic Arts

Options activity provides a look at expectations on EA, LYFT and DIS stock

U.S. stock futures continue to be ravaged by bears this morning. The latest selling salvo came following President Trump stating that China “broke the deal.” The trade war has officially thrust itself back into the collective conscious of investors.

Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.89%, and S&P 500 futures are lower by 0.99%. Nasdaq-100 futures have lost 1.25%.

In the options pits, call volume won the day, even as overall volume grew slightly above average levels. Specifically, about 17.9 million calls and 16.3 million puts changed hands on the session.

Meanwhile, the end of day tally at the CBOE closely matched the previous session with the single-session equity put/call volume ratio inching down to 0.66. The 10-day moving average continued its ascent, rising to 0.62.

Earnings announcements dominated the options landscape. Disney (NYSE:DIS), Electronic Arts (NASDAQ:EA) and Lyft (NASDAQ:LYFT) all released their quarterly results over the past two days.

Let’s take a closer look:

Electronic Arts (EA)

Electronic Arts shares saw a nasty intraday plunge that rapidly reversed its strong open. By day’s end, its earnings-induced up gap had filled, and the stock sat back below all major moving averages. The sharp rejection of higher prices reaffirms sellers’ dominance and suggests EA stock needs more time before returning to full health.

For the quarter, EA earned 69 cents per share on revenue of $1.24 billion. Both measures marked a steep decline versus the companies year-ago profits. For a more in-depth look at the numbers, go here.

Until the stock can climb above the 200-day moving average and overhead resistance near $105, I suggest steering clear of bullish trades.

On the options trading front, traders came after calls with aggression. Activity swelled to 393% of the average daily volume, with 98,244 total contracts traded. Calls claimed 57% of the sum.

With the stock returning to unchanged on the day, implied volatility got crushed. It now sits at 36% or the 38th percentile of its one-year range. Premiums are baking in daily moves of $2.11 or 2.2%.

Lyft (LYFT)

Shareholders hoping for a boost from Lyft’s first earnings announcement as a public company were massively disappointed yesterday. For the quarter, LYFT lost $9.02 per share on revenue of $776 million. As dreadful as the loss appears, it does mark an improvement from the year-ago quarter where the company lost $11.40 per share.

Silver lining notwithstanding, sellers swarmed driving the stock down 11.1% to a new low. With only one month of trading under its belt, LYFT remains a challenging stock to perform technical analysis on. That said, the series of lower lows and lower highs that has emerged confirms it’s in a downtrend and it should be treated as bearish until resistance levels give way.

On the options trading front, puts proved victorious, outpacing calls by a slim margin. Activity climbed to 197% of the average daily volume, with 147,854 total contracts traded. Puts contributed 53% to the total.

The increased demand drove implied volatility higher on the day to 25%, placing it at the 31st percentile of its one-year range. Premium sellers will be happy to note this is the highest level since late-July.

Disney (DIS)

Disney delivered earnings good enough to allow the entertainment king to hold onto this quarter’s monster gains in its share price. Although DIS stock initially traded 2.4% higher after-hours, it has since fallen back and is slated to open unchanged on the day.

For the quarter, Disney raked in earnings-per-share of $1.61 on revenue of $14.92 billion. Analysts expected $1.58 in EPS on $14.36 billion in revenue according to a Refinitiv survey.

Options trading was amped up ahead of the number with calls leading the way. Activity ticked slightly higher to 135% of the average daily volume, with 330,981 total contracts traded; 68% of the trading came from call options alone.

Premiums were forecasting a move of $4.46 or 3.3% ahead of the report, so this morning’s flat open should deliver a big volatility crush. Traders short premium into the number will awake to profitable positions.

As of this writing, Tyler Craig held bullish positions in Disney. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

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