U.S. stock futures are trading slightly lower this morning, though they’ve rallied modestly from their overnight lows.
Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.21%, and S&P 500 futures are lower by 0.19%. Nasdaq-100 futures have lost 0.37%.
In the options pits, put volatility soared Friday, helping to drive overall volume well above average levels. Specifically, about 20.2 million calls and 23.8 million puts changed hands on the session.
The panic was pervasive at the CBOE, where the single-session equity put/call volume ratio rocketed to its highest reading of the year at 0.83. Meanwhile, the 10-day moving average halted its slide and rallied back to 0.71. Readings this high tend to be contrarian signals that a bounce is imminent.
Friday’s fear-fest lit a fire under put demand in United States Steel (NYSE:X), Facebook (NASDAQ:FB) and JPMorgan Chase (NYSE:JPM), among others.
Let’s take a closer look:
United States Steel (X)
United States Steel notched its seventh straight losing session Friday, bringing the company’s year-to-date losses to 36%. The pain is even more potent (-52%) if you measure the drawdown from its February peak. Indeed, the selling pressure has been relentless for the past three months in the entire metal and mining space. At this rate, X stock could soon visit its all-time low of $6.15 carved out in 2016.
On the options trading front, traders heavily favored puts on the day. Total activity jumped to 152% of the average daily volume, with 111,497 contracts traded; 70% of the trading came from call options alone.
Implied volatility rallied to its highest reading since January at 61%. That places it at the 67th percentile of its one-year range. Premiums are pricing in daily moves of 45 cents or 3.8%.
Facebook (FB)
The technology sector saw heavy selling pressure on Friday, and the Nasdaq breached its 200-day moving average. Facebook fell prey to the bear raid breaking a support zone of its own, falling beneath its 50-day moving average for the first time since the beginning of the year.
Before Friday, the social media king had been holding firm in the face of the selling. But no longer. The next major floor is $161, so consider that your long-term target if you believe the summer correction will go the distance.
On the options trading front, calls outpaced puts on the session despite the beatdown. Activity grew to 132% of the average daily volume, with 274,433 total contracts traded. Calls claimed 62% of the session’s sum.
Implied volatility ticked higher on the day to 31%, placing it at the 41st percentile of its one-year range. Traders now anticipate daily moves of $3.50 or 2%.
JPMorgan Chase (JPM)
With the rout in bond yields and subsequent yield curve inversion, recession fears have been thrust back into the forefront. And bank stocks don’t like it. Today was JPMorgan Chase’s turn to see a surge in put trading. With the day’s losses, JPM stock is now down just shy of 10%. The correction has been damaging enough to push it back below all major moving averages, effectively upending the bullish trend reversal that took place after April’s earnings release.
Until it can reclaim the high ground above the $112 resistance zone, sellers hold the upper hand.
On the options trading front, puts were favored over calls. Total activity grew to 206% of the average daily volume, with 104,008 contracts traded. Puts accounted for 60% of the day’s take.
The increased demand drove implied volatility higher on the day to 26%, placing it at the 36th percentile of its one-year range. Premiums are baking in daily moves of $1.72 or 1.6%.
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.
