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Friday’s Vital Data: Gap, Boeing and Amazon

Options activity provides a look at expectations on GPS, BA and AMZN stock

U.S. stock futures are trading lower this morning after China said it would impose new tariffs on an additional $75 billion in U.S. goods. Another potentially market-moving event today is an address by Federal Reserve Chair Jerome Powell to economists that could provide further insight into the future path of interest rates.

Friday's Vital Data: Gap, Boeing and Amazon
Source: Shutterstock

Against this backdrop, futures on the Dow Jones Industrial Average are down 0.52%, and S&P 500 futures are lower by 0.50%. Nasdaq-100 futures have shed 0.75%.

In the options pits, call volume won the day Thursday even as overall activity fell below-average levels. Specifically, about 14.8 million calls and 13.3 million puts changed hands on the session.

Meanwhile, over at the CBOE, the spread between calls and puts narrowed, driving the single-session equity put/call volume ratio back up to 0.74 — a one-week high. The 10-day moving average held its ground at 0.72.

Options activity was buzzing in Gap (NYSE:GAP), Boeing (NYSE:BA) and Amazon (NASDAQ:AMZN), among others.

Let’s take a closer look:

options trading

Gap (GPS)

The drumbeat of retail earnings continued this morning with Gap. This season some companies like Target (NYSE:TGT) have dazzled while others like Macy’s (NYSE:M) have disappointed. Gap split the difference posting mixed results.

For the fiscal second-quarter, the company raked in adjusted earnings-per-share of 63 cents versus estimates of 53 cents. On the top line sales came in at $4.01 billion versus $4.02 billion expected. Same-store sales were particularly disappointing, falling 4% versus an expected decline of 3.1%.

GPS stock is trading down just shy of 5% premarket. Because it rallied a similar amount yesterday in anticipation of this morning’s event, the damage isn’t that bad. The price trend for Gap shares has been bearish for ages, and this report will do little to change the overall posture. If you are shopping in the land of retail stocks, I suggest steering clear of this one until it can at least break above short-term resistance levels such as the $19 zone.

As far as options trading goes, speculators favored calls throughout the day. Activity zipped to a whopping 1,186% of the average daily volume, with 119,063 total contracts traded; 70% of the trading came from call options alone.

Implied volatility was running hot ahead of this morning’s report. At 73%, it was perched at the 100th percentile of its one-year range. Premiums were baking in a move of $2.23 or 12.6%. So with the stock only falling 4.8%, it’s fair to say options buyers way overpaid for their wares.

Boeing (BA)

Negative news surrounding Boeing’s 737 MAX jets has hounded the stock for months now. But yesterday the ailing aerospace juggernaut finally received some good news. According to a Reuters report, the company is planning to begin manufacturing 737 MAX jets again in February at an initial pace of 52 planes per month. The plans hinge on regulators giving the green light for the aircraft to fly once more.

BA stock took flight on the news, climbing 4.2% on its highest volume session of the month. The gains were enough to carry the stock north of its 50-day moving average for the first time since last month’s earnings ugliness ushered it to the south side of the indicator.

Much work remains before BA stock reclaims its former glory, but Thursday’s rally could be the first step in reversing its downtrend higher. Look for a run toward the next resistance zone at $380.

On the options trading front, call popularity popped alongside the stock. Total activity grew to 67% of the average daily volume, with 211,756 contracts traded. Calls claimed 67% of the take.

Implied volatility lifted slightly reflecting increased demand for derivatives. At 29% it now sits at the 30th percentile of its one-year range. Premiums are pricing in daily moves of $6.53 or 1.8% so set your expectations accordingly.

Amazon (AMZN)

Resistance hangs heavy over Amazon shares, rejecting yet another rally attempt on Thursday. The $1,830 zone has denied no less than five breakout bids over the past month. Yesterday marked the latest rejection ending with a bearish reversal candle. The descending 20-day moving average is also now exerting downward pressure on the shares.

On a bright note, the clarity of where resistance lies makes it easy to identify when and if one should become bullish on AMZN stock. If we can close above $1,830, then swing away with bull plays. Otherwise, sellers hold the upper hand.

The action on the options trading side wasn’t all that exciting, and yet AMZN still landed atop the leaderboard. Calls outpaced puts by a slim margin despite the price drop. Activity fell short on the session adding to 92% of the average daily volume, with 153,276 total contracts traded. Calls accounted for 53% of the session’s sum.

Implied volatility held firm at 25% or the 10th percentile of its one-year range. Premiums are cheap, which increases the appeal of long option plays like debit spreads. Premiums are baking in daily moves of $28.59 or 1.6%.

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.

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