Introducing: Stefanie Kammerman, Legendary Dark Pool Trader

For the 1st time ever, a former financial insider is stepping forward to show you how to spot Wall Street’s “hidden” trades before they move the market.

Wed, July 15 at 7:00PM ET

Wednesday’s Vital Data: Coca-Cola, Bank of America and Delta Airlines

Options activity provides a look at expectations on KO, BAC and DAL stock

U.S. stock futures are losing ground this morning after Caterpillar (NYSE:CAT) and Boeing (NYSE:BA) both reported disappointing earnings results.

Wednesday's Vital Data: Coca-Cola, Bank of America and Delta Airlines
Source: Shutterstock

Heading into the open, futures on the Dow Jones Industrial Average are down 0.38%, and S&P 500 futures are lower by 0.27%. Nasdaq-100 futures have lost 0.45%.

In the options pits, the chasm between call and put volume widened Tuesday with around 18.1 million calls and 13.4 million puts traded. The pick up in call demand makes sense given the broad market rally.

The action at the CBOE followed the bullish script as well with a drop in the single-session equity put/call volume ratio rose to 0.61. Meanwhile, the 10-day moving average ticked up to 0.61.

Options activity favored the call side in most stocks topping the most-actives list. Coca Cola (NYSE:KO) shares surged to record highs after a solid earnings beat. Bank of America (NYSE:BAC) led the bank stock rally with a strong breakout. Finally, Delta Airlines (NYSE:DAL) was flooded with activity ahead of today’s ex-dividend date.

Let’s take a closer look:

options trading

Coca-Cola (KO)

The soda king delivered a sugar high to investors yesterday after smashing earnings forecasts. For the second quarter, Coca-Cola earned 63 cents per share on $10 billion in revenue. Factset consensus called for earnings of 61 cents on $9.9 billion revenue.

Wall Street cheered the results, pushing KO stock up 6.1% to a record high. On the charting front, everything is awesome. The uptrend is robust and now increasing in momentum. And moving averages are rising across all time frames. Despite this year’s gains, the dividend yield for KO still sits at an attractive 2.94% with quarterly 40 cent payouts.

As far as options trading goes, calls ran the tables all day long. Total activity zoomed to 976% of the average daily volume, with 174,255 contracts traded; 73% of the trading came from call options alone.

Implied volatility was baking in a $1.36 or 2.7% move into the earnings release, so the 6.1% jump was a massive move relative to expectations. Chalk this one up as a big win for volatility buyers.

Bank of America (BAC)

Bank stocks were on the move yesterday with Bank of America leading the charge. Shares of the historically sleepy stock awoke in a big way, rising 2.3% on the session. That places BAC at a two-month high and on firm footing to attack this year’s peak of $31.17.

While the short-term trend is rising, the intermediate- and long-term trends still have work to do. BAC stock has been in a range for so long that it’s going to take more than a two-month rise to pull them higher. Volume patterns are lending a hand to bulls with three powerful accumulation days over the past few weeks, showing institutions are wading into the waters.

On the options trading front, traders favored calls throughout the session. Activity grew to 161% of the average daily volume, with 331,430 total contracts traded. Calls claimed 58% of the day’s take.

Implied volatility drifted at 21% or the 17th percentile of its one-year range. Premiums are scraping the bottom of the barrel so don’t expect much if you’re looking to sell options here.

Delta Airlines (DAL)

The airline industry was another space joining Tuesday’s market rally. Delta Airlines was a big winner on the day as traders bought up its stock ahead of tomorrow’s ex-dividend date. As is often the case ahead of these quarterly payouts, investors took to the options market for short-term control of the stock to qualify for the cash payment.

DAL stock carries a dividend yield of 2.57% with 40 cents due to shareholders of record as of yesterday’s close. Dividends aside, its price chart doesn’t look half bad either. A summer surge has Delta flying at record highs. Last week’s pullback created a lower-risk entry that was enthusiastically bought. And moving averages are rising loyally beneath prices to confirm buyers control all time frames.

On the options trading front, traders came after calls with a vengeance. Activity swelled to 259% of the average daily volume, with 86,976 total contracts traded. Calls dominated the day, accounting for 87% of the sum.

Implied volatility remains as dead as ever at 23%. That places the metric at the 6th percentile of its one-year range and means premiums are pricing in daily moves of 90 cents or 1.4%.

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,

©2020 InvestorPlace Media, LLC