Wednesday’s Vital Data: Snap, Boeing and United States Steel

Options activity provides a look at expectations on SNAP, BA and X

U.S. stock futures are trading near unchanged this morning as traders gear up for this afternoon’s announcement from the Federal Reserve.

Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.05%, and S&P 500 futures are higher by 0.03%. Nasdaq-100 futures have added 0.13%.

In the options pits, call trading zoomed higher helping drive overall volume to above-average levels. Specifically, about 22.8 million calls and 16.7 million puts changed hands on the session. The bullish festivities made waves at the CBOE, where the single-session equity put/call volume ratio plunged to 0.55 — a two-week low. Meanwhile, the 10-day moving average slipped to 0.55.

Snap (NYSE:SNAP) saw renewed options interest after a price target hike from BTIG sent its stock flying. Boeing (NYSE:BA) stock soared after the aerospace juggernaut received a large buy order at the Paris Air Show. Finally, United States Steel (NYSE:X) benefited from a resurgence in the metal and mining sector.

Let’s take a closer look:

Wednesday's Vital Data: Snap, Boeing and United States Steel, options trading

Snap Inc (SNAP)

The message from Snap’s volume patterns is clear — institutions are stampeding into the stock. Yesterday’s rousing 9.7% rally was simply the latest episode in a saga of accumulation days. As is usual for outlier sessions, there was a catalyst. BTIG analyst Rich Greenfield boosted the firm’s price target from $15 to $20 while reiterating a buy rating. Greenfield cited his firm’s increased conviction in the Snapchat parent as well as investors skepticism of the ongoing SNAP stock recovery as reasons for the renewed optimism.

This year’s turnaround is certainly worth celebrating. What began as a sharp up-gap following February’s earnings release has grown to a full-fledged long-term trend turnaround. SNAP is now up 170% year-to-date.

Derivatives traders were certainly excited about Tuesday’s action. The groundswell in activity to 266% of the average daily volume made SNAP the most popular stock in the options pits; 276,294 total contracts traded with calls claiming 76% of the tally.

The uptick in demand lifted implied volatility to 54%. With an IV rank of 21%, it remains in the lower quartile of its one-year range suggesting long premium plays (like long calls) are the way to go. Traders are pricing in daily moves of 50 cents or 3.4%.

Boeing (BA)

Boeing stock is turning the corner. So says Tuesday’s 5% surge, which delivered a breakout that finally pulled the beaten-down aerospace stock into an uptrend. It marks the first time BA stock has been above the 50-day moving average since the fallout from the fatal Ethiopian airlines crash of its 737 MAX earlier this year.

A flood of new orders for Boeing’s aircraft at the Paris Air Show had bulls on the move yesterday. International Airlines Group revealed its intent to purchase 200 737 MAX jets. The company also nabbed orders for two 787 Dreamliner aircraft.

With the price trend of BA stock now pointing higher, bullish trades are back on the menu. Consider $400 the next upside target.

On the options trading front, traders chased calls throughout the session. Total activity climbed to 219% of the average daily volume, with 159,187 contracts traded. Calls accounted for 66% of the take.

Implied volatility grew to 28%, reflecting an increase in option premiums. The reading now stands at the 27th percentile of its one-year range. The expected daily move in the stock is $6.59 or 1.8%. Bull call spreads offer a smart, limited risk bet on more upside here.

United States Steel (X)

Traders came after metal and mining stocks in a big way. The Metals & Mining ETF (NYSEARCA:XME) saw its second-highest volume session of 2019 and climbed 2.9%. United States Steel proved one of the most popular stocks in the industry, notching a 4.4% gain of its own.

But bulls weren’t finished. The buying binge is continuing premarket with the stock up another 4% to $15.15.

Watch for a close above the 50-day moving average to signal X stock’s four-month downtrend has finally ended. Depending on the outcome of this afternoon’s Fed announcement, it could happen today. A break back below support at $13.20 would invalidate the reversal attempt. Consider that an appropriate stop area.

On the options trading front, calls outpaced puts by a modest margin. Total activity rocketed to 150% of the average daily volume, with 86,281 contracts traded. Calls claimed 60% of the sessions sum.

Implied volatility drifted sideways but remained at a lofty 57% or the 57th percentile of its one-year range. Naked puts are an interesting play here. Premiums are pricing in daily moves of 52 cents or 3.6%.

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.


Article printed from InvestorPlace Media, https://investorplace.com/2019/06/wednesdays-vital-data-snap-boeing-and-united-states-steel/.

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