U.S. stock futures are climbing higher amid a broad market snap-back following Monday’s meltdown.
In early morning trading, futures on the Dow Jones Industrial Average are up 0.48%, and S&P 500 futures are higher by 0.63%. Nasdaq-100 futures have added 0.87%.
In the options pits, put volumes exploded as panicked traders flooded the derivatives market in search of protection. Specifically, about 19.9 million calls and 23.4 million puts changed hands on the session.
The fear fest made waves at the CBOE as well with the single-session equity put/call volume ratio closing near its high water mark for 2019 at 0.79. Meanwhile, the 10-day moving average rose to 0.67.
Options activity jumped in the following three stocks: Alibaba (NYSE:BABA), Apple (NASDAQ:AAPL) and Advanced Micro Devices (NASDAQ:AMD)
Let’s take a closer look:
Alibaba (BABA)
The latest salvo in a seemingly endless trade war has not been kind to Alibaba shares. With Monday’s drubbing, the Chinese e-commerce giant has now fallen $25 or 13% over the past ten days. Relative weakness in the technology sector also hasn’t helped its plight.
What I find particularly unfortunate is the beautiful breakout in BABA stock that preceded the rug pull. What could have been a textbook resistance breach and follow through morphed into a nasty bull trap. The stock has fallen to a horizontal support zone at $170, so if buyers want to mount a rescue, this is the spot. Alibaba is slated to report earnings on May 15.
As far as the options trading goes, calls were curiously the big winner on the day despite the wicked thrashing. Activity swelled to 146% of the average daily volume, with 237,761 total contracts traded; 72% of the trading came from call options alone.
Implied volatility rallied on the session to 41% placing it at the 44th percentile of its one-year range. Premiums are now baking in daily moves of $4.42 or 2.6%.
Apple (AAPL)
Apple shares soured yesterday amid concerns that the latest round of tariff increases on Chinese goods will crimp profits. You can find details on which products are being most affected here.
AAPL stock finished 5.81% lower notching its second-largest volume day of the year. Chart watchers are particularly concerned that the plunge pushed AAPL back below its 50-day and 200-day moving averages. Bad things happen south of the 200-day, so until the stock can remount the $194 level, consider sellers in control.
On the options trading front, calls outpaced puts on the session. Activity climbed to 160% of the average daily volume, with 859,287 total contracts traded. Calls claimed 56% of the sum.
The increased demand drove implied volatility up to 35%, placing it at the 59th percentile of its one-year range. This marks the highest reading since January. Premiums are pricing in daily moves of $4.12 or 2.2%.
Advanced Micro Devices (AMD)
Advanced Micro Devices was a full participant in yesterday’s tech sector bashing. And that’s not a good thing. By day’s end, the chip stock had fallen 6.2% and is now testing support in the form of its 50-day moving average and the ascending trendline that has defined its 2019 trend.
If buyers want to preserve the integrity of this year’s trend, now’s the time to step-up. Otherwise, this will turn messy. AMD stock has held up much better than most technology stocks. It’s one of the few still sitting above its 50-day moving average.
As far as the options trading goes, calls proved more popular than puts. Total activity rose to 121% of the average daily volume, with 294,273 contracts traded. Calls accounted for 55% of the tally.
Compared to the implied volatility explosion in most other stocks, the action in AMD has been boring. Its implied volatility remains subdued at 53% or the 26th percentile of its one-year range. That means premiums are pricing in daily moves of 88 cents or 3.4%.
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.
