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Monday’s Vital Data: Johnson & Johnson, Ford and Square

Options activity provides a look at expectations on SQ, F and JNJ stock

U.S. stock futures are trading higher as the Street gears up for a slew of bank earnings this week. Citigroup (NYSE:C) kicked off the festivities this morning with an earnings beat that has the stock up 1% premarket.

Monday's Vital Data: Johnson & Johnson, Ford and Square
Source: Shutterstock

Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.19%, and S&P 500 futures are higher by 0.22%. Nasdaq-100 futures have added 0.30%.

In the options pits, call volume saw a modest uptick heading into the weekend. The S&P 500 notching a new record high on the day was no doubt a driver of the demand. Overall, some 19.2 calls and 15.6 puts changed hands on the session. The euphoria was felt at the CBOE, with the single-session equity put/call volume ratio dropping to 0.55, which is near its 2019 low. At the same time, the 10-day moving average slipped just below 0.60.

Options trading was on fire in the following three stocks on Friday: Johnson & Johnson (NYSE:JNJ), Ford (NYSE:F) and Square (NYSE:SQ).

Let’s take a closer look:

options trading chart

Johnson & Johnson (JNJ)

Johnson & Johnson shares plunged 4.15% on Friday following news that the U.S. Department of Justice is investigating the company. According to a Bloomberg report, the DOJ is seeking evidence that JNJ lied about knowing its talcum powder had cancer risks.

The fall sent JNJ stock below all major moving averages and places it on precarious footing ahead of tomorrow morning’s earnings release. We aren’t seeing any immediate downside follow through, however. The stock is hovering near unchanged in premarket trading. The next two support targets are $130 and $125.

On the options trading front, the sour news spurred put demand. Total activity jumped to 559% of the average daily volume, with 114,265 contracts traded. Puts accounted for 54% of the day’s take.

Implied volatility rocketed higher on the day to 25% placing it at the 56th percentile of its one-year range. The expected move heading into tomorrow’s report is $3.83 or 2.9%.

Ford (F)

Ford stock awoke on Friday, booming 3% on above-average volume. The surge completed a bull flag pattern that formed over the past two weeks and places F shares on the cusp of breaking a key intermediate-term resistance zone. We could take the pattern recognition one step further. The past three months have seen a cup-and-handle pattern that will provide a powerful bullish signal if F can rise above $10.50 this week.

Income seekers still hold Ford in high regard given its juicy 5.72% dividend yield.

On the options trading front, traders came after calls with a vengeance. Activity grew to 326% of the average daily volume, with 141,970 total contracts traded; 72% of the trading came from call options alone.

Implied volatility continues to hover near the lower-end of its range. At 31%, it’s perched at the 26th percentile of its one-year range. Premiums are baking in daily moves of 20 cents or 1.9%.

Square (SQ)

Square was the top-performing stock on my watchlist last week. The four-day rally that began on Tuesday with an upgrade from Raymond James ended with a bang ahead of the weekend. Friday’s 3.6% pop saw aggressive buying throughout the session, officially registering its fourth accumulation day in a row.

With the ramp, SQ stock is now testing a crucial year-long resistance zone. A break above $83 would tee the stock up for a run back toward $100.

On the options trading front, optimism fueled call demand on the session. Total activity climbed to 266% of the average daily volume, with 141,982 contracts traded. Calls claimed 70% of the session’s sum.

Implied volatility drifted sideways at 43%. That places it at a lowly 13th percentile of its one-year range and suggests options are cheap. Premiums are pricing in daily moves of $2.22 or 2.7%.

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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