U.S. stock futures are flirting with unchanged this morning.
Heading into the open, 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 0.01%.
In the options pits, overall volume levels sank like a stone Monday. As you would expect for such a lackluster session, calls led the way with about 15.8 million contracts traded versus only 12 million puts.
The see-saw action continued in the CBOE single-session equity put/call volume ratio with a rally to 0.59. With the reading in the center of its one-month range, there aren’t any signals flashing right now. The 10-day moving average held steady at 0.60.
Let’s take a closer look:
Bank earnings are taking center stage this week. Citigroup led the charge Monday morning with a solid showing. For the second quarter, the company scored $1.95 of earnings-per-share on revenue of $4.79 billion. Both measures reflected modest growth versus the year-ago quarter, where C earned $1.63 on $4.71 billion of revenue.
Importantly, the profits came in passed the Street’s expectations of $1.81. As has been usual with bank earnings announcements of late, the reaction did little to change the technical posture of the stock.
Citigroup remains in a slow-moving uptrend above all major moving averages. There is quite a bit of old resistance in the $72 to $75 zone making this a tough spot to build out new positions. Nonetheless, the path of least resistance remains higher.
On the options trading front, calls ruled the day. Total activity ramped to 276% of the average daily volume, with 155,557 contracts traded; 70% of the trading came from call options alone.
With the snoozer of a reaction, implied volatility slipped on the session to lowly 23%. That lands it at the 16th percentile of its one-year range. Volatility sellers were the winners of this quarter’s earnings battle. A volatility crush and little change in the stock price is just what the doctor ordered for traders employing short volatility strategies like condors and strangles into the event.
The recent recovery in Twitter shares accelerated with a 2.2% run yesterday. The jump carried TWTR close to a new 2-month high and signals the stock has reclaimed much of the gains scored after last quarter’s earnings release.
Consider $41 the next upside target. Traders don’t have to wait long for the next catalyst. Its earnings announcement looms on July 26 before market open. If history is any indication, TWTR should see a big move after the event.
We saw bullish activity on the options trading front as well, with traders heavily favoring calls on the session. By day’s end, 189% of the average daily volume racked up, with 128,780 total contracts traded. Calls claimed 75% of the tally.
The pre-earnings ramp in implied volatility continued on Monday, pushing the metric to 53% or the 41st percentile of its one-year range. Premiums are pricing in daily moves of $1.30 or 3.4%.
The theme of accelerating momentum continued with Tesla shares. Monday’s 3% jump saw heavy volume and is placing an exclamation point on the company’s ongoing recovery. Since bottoming at $176.99 on June third, TSLA stock has rallied 43%. Not bad for six weeks of work.
In the process, the downtrend was shattered, and both the 20-day and 50-day moving averages reversed higher. There’s no doubt buyers hold the upper hand heading into the July 24 earnings announcement. Traders seeking an upside target should keep an eye on $280.
That said, the stock is down just shy 2% of premarket, so the five-day rally may finally be ready for a rest.
On the options trading front, puts outpaced calls on the day despite the rally. Total activity climbed to 144% of the average daily volume, with 399,042 contracts traded. Puts accounted for 59% of the trading.
The ongoing recovery in its share price has really taken the wind out of implied volatility’s sails. It has descended into the basement at 62%, which places it at the 21st percentile of its one-year range. Premiums are pricing in daily moves of $9.84 or 3.9%.
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.