U.S. stock futures are trading mixed this morning. The big takeaway from yesterday’s bullish session was the emergence of small-cap stocks, which saw substantial gains across the board.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.10%, and S&P 500 futures are lower by 0.10%. Nasdaq-100 futures have lost 0.49%.
In the options pits, the reign of call volume domination continued Wednesday with around 19.5 million calls and 15.6 million puts changing hands on the session.
Meanwhile, over at the CBOE, the single-session equity put/call volume ratio bounced back to 0.66. The 10-day moving average climbed to 0.62.
Options traders zeroed in on quarterly earnings yesterday. Snap (NYSE:SNAP) shot to the moon on better-than-expected numbers. Facebook (NASDAQ:FB) is opening 1.8% higher this morning after delivering its own earnings beat. Finally, Boeing (NYSE:BA) shares fell 3% after posting its worst quarterly loss ever.
Let’s take a closer look:
Snap (SNAP)
Snap is back, baby! This year’s resurrection was already impressive, but with yesterday’s post-earnings boom, the SNAP stock recovery is officially bananas. The single-session 18.7% rally saw meteoric volume and brings the year-to-date gains to 220%.
For the second-quarter, the Snapchat parent posted a loss of 6 cents per share, signaling a marked improvement to the year-ago quarter loss of 14 cents. Revenue roared to $388 million, sailing well past analyst calls for $359 million. Third-quarter guidance was also rosy with the company suggesting sales of $410 to $435 million resulting in smaller losses than expected.
This year’s turnaround has been strong enough (and long enough) to turn the 200-day moving average higher. Buyers have now wrested back control of the trend across all time frames.
On the options trading front, traders favored calls on the session. Total activity ballooned to 67% of the average daily volume, with 743,632 contracts traded; 67% of the trading came from call options alone.
Option premiums were pricing in a move of 13.5% into earnings to the 18.7% climb delivered a win to volatility buyers.
Boeing (BA)
The drawn-out drama surrounding Boeing’s 737 Max jet came to a head this week with the company posting its worst quarterly loss ever. The $2.9 billion hit translated into a $5.82 loss per share. Revenue also hit the skids dropping to $15.8 billion.
Airplane delivery for the quarter fell sharply with 104 fewer planes provided to customers versus the year-ago quarter. BA stock reacted negatively, falling 3.1% on the session. That lands the embattled Dow component in the middle of its four-month trading range. The choppy range has proved few desirable setups for directional traders.
Until we see a definitive break one way or the other, BA stock may belong in the “too hard” bucket.
On the options trading front, calls slightly outpaced puts. Activity rose to 213% of the average daily volume, with 170,235 total contracts traded. Calls added 53% to the session’s sum.
Implied volatility fell slightly to 24% or the 16th percentile of its one-year range. Premiums are now pricing in daily moves of $5.56 or 1.5%.
Facebook (FB)
Buyers boosted Facebook shares throughout the day after a weak open. The social media king closed at the high of the day and a stone’s throw from new 52-week highs just in time for last week’s earnings report.
Fortunately, the release kept the enthusiasm alive and has FB stock gaining another 1.80% in premarket trading. Second-quarter earnings arrived at $1.99 per share on revenue of $16.89 billion. Both measures bested estimates. The company also reported an 8% year-over-year increase in DAUs and MAUs to 1.59 billion and 2.41 billion, respectively.
As far as options trading goes, calls were in demand throughout the day, claiming 61% of the contracts changing hands. Total activity climbed to 254% with 599,314 contracts traded.
The expected move ahead of last night’s release was $12.10 or 6%. So, that means this morning’s 1.8% jump came in well below expectations. Volatility sellers swinging positions like iron condors and short strangles are waking up to a big win. Given the snoozer of a reaction, implied volatility should bite the dust today.
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.
