Wednesday’s Vital Data: AbbVie, FedEx and Micron

U.S. stock futures are trading higher on the back of optimism surrounding a trade deal. Treasury Secretary Steven Mnuchin said the U.S. was nearing a trade deal with China and is confident talks at the G-20 summit will go well.

Against this backdrop, futures on the Dow Jones Industrial Average are up 0.28% and S&P 500 futures are higher by 0.28%. Nasdaq-100 futures have added 0.46%.

In the options pits, call volume held the upper hand yesterday despite the market’s retreat. Overall volume levels held steady near average readings with around 18.1 million calls and 14 million puts changing hands on the session.

Meanwhile, over at the CBOE, the gap between call and put volume narrowed. The single-session equity put/call volume ratio rose to 0.63 — a two-week high. The 10-day moving average continues to hold steady at one-month low territory at 0.62.

Options activity was buzzing in the following three stocks. Abbvie (NYSE:ABBV) shares plunged after the company announced it’s acquiring Allergan (NYSE:AGN). FedEx (NYSE:FDX) shares are up slightly after a well-received earnings release. Finally, Micron (NASDAQ:MU) shares are set to open 9% higher after smashing earnings estimates.

Let’s take a closer look:

Tuesday's Vital Data: AbbVie, FedEx and Micron options trading

AbbVie (ABBV)

Acquisition news sent AbbVie tumbling yesterday. The biopharmaceutical company best known for its production of Humira announced it is buying Allergan for $188.24 or a 45% premium to its price a day prior. The deal carries a $63 billion price tag and sent ABBV stock skidding 16%. AGN shareholders were the clear winner with the stock closing 25% higher.

With the smackdown, ABBV fell close to a two-year low. It has come a long way down from last year’s peak of $125.86, and its price chart continues to look weak. While an oversold bounce is likely in the cards over the coming weeks, you should view it with skepticism. There’s simply way too much overhead resistance to bet on bulls here.

On the options trading front, activity skyrocketed to 1,417% of the average daily volume, with 212,541 total contracts traded. Calls claimed 58% of the tally.

The increased demand drove implied volatility higher on the day to 33% placing it at the 48th percentile of its one-year range. Premiums are now baking in daily moves of $1.36 or 2.1%.

FedEx (FDX)

FedEx earnings were good enough to send the transportation giant slightly higher after hours. FDX stock is set to open up 1.6% after matching revenue estimates of $17.8 billion for the quarter and beating earnings-per-share forecasts. Analysts were looking for earnings of $4.85 a share, and the company delivered $5.01.

FDX shares remain a tough buy here. Headwinds from the ongoing trade war continue to hamper the stock, which is mostly flat for 2019. A longer-term view, however, reveals ample weakness over the past two years. Since peaking last January at $274.66, FDX has fallen 43% with multiple down gaps on disappointing earnings.

There are much healthier stocks to play if you’re shopping for bullish trades.

On the options front, traders were looking for a move of $7.52 or 4.8% after earnings. That makes this morning’s 1.6% rise a real dud and should bring big profits to those holding short volatility positions into earnings. Total activity jumped to 536% of the average daily volume, with 88,784 contracts traded. Puts accounted for 53% of the day’s take.

Micron (MU)

Micron was the other marquee name reporting earnings last night and traders love the number. The wounded semiconductor stock needed a catalyst to pull it out of the death spiral that began last month. For the quarter, Micron earned $1.05 per share on revenue of $4.79 billion. Both measures topped estimates and buyers swarmed after hours. MU stock is set to open up $3 or 9%.

There is a key resistance level near $36, which will be tested this morning. It rejected the last three recovery attempts, so a successful close above it will be needed to confirm buyers have the strength to reverse the trend higher.

On the options trading front, puts outpaced calls by a slim margin (53% vs. 47%). Activity climbed to 243% of the average daily volume, with 311,856 total contracts traded.

The expected move was $2.34 or 7%, which lands this morning’s 9% jump slightly outside of forecasts. Chalk this up as a slight win for volatility buyers.

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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