U.S. stock futures are trading higher after a volatile overnight trading session. The optimism is being fueled by comments by President Donald Trump that China wants to negotiate.
“China called last night our top trade people and said ‘let’s get back to the table’ so we will be getting back to the table, and I think they want to do something,” Trump said.
Heading into the open, futures on the Dow Jones Industrial Average are up 0.88%, and S&P 500 futures are higher by 0.67%. Nasdaq-100 futures have added 0.78%.
In the options pits, overall volume rocketed higher with puts leading the charge. Approximately 22.7 million calls and 26.5 million puts changed hands on the session.
The fear surge made waves at the CBOE, where the single-session equity put/call volume ratio jumped to 0.88 — its second-highest reading of the year. Meanwhile, the 10-day moving average turned higher once more, rising to 0.74.
Options activity was unusually hot in Salesforce (NYSE:CRM), Target (NYSE:TGT) and Apple (NASDAQ:AAPL).
Let’s take a closer look:
Salesforce (CRM)
What better-than-expected earnings giveth, Trump tweets taketh away. CRM stock roared out of the gate Friday after besting estimates, opening up 6.4%. However, by day’s end, the gains all but disappeared as trade war fears ravaged the market. Had Salesforce delivered their rousing report on another day, the stock likely would have held to its overnight gains.
On the technical front, CRM remains stuck in a stubborn trading range. Its crisscrossing moving averages give little for trend traders to latch onto. Until buyers can finally blast through horizontal resistance at $160 and $165, temper your bullish expectations.
As far as options trading goes, CRM stock options were buzzing throughout the day. Traders favored calls by over two to one. Activity soared to 481% of the average daily volume, with 248,814 total contracts traded; 71% of the trading came from call options alone.
Implied volatility fell to 32% placing it at the 26th percentile of its one-year range. Premiums are now baking in daily moves of $3.05 or 2%.
Target (TGT)
Friday’s market bloodbath finally cooled Target shares. After reporting blistering earnings numbers, the retail ringleader jumped almost 25% in two trading sessions. Friday’s slight giveback comes as a well-deserved bout of profit-taking. Chart watchers are hoping for a few more days of retreat to provide a better entry point.
Finding low-risk opportunities after a 25% gallop is impossible. Days like Friday allow the stock to digest the large gain, and create a pullback or basing pattern. With powerful fundamentals at its back, any weakness cropping up this quarter has to be viewed as a buying opportunity.
On the options trading front, traders shifted to puts in a big way. Total activity jumped to 231% of the average daily volume, with 115,638 contracts traded. Puts added 71% to the session’s sum.
Implied volatility ticked slightly higher to 29%, landing it at the 40th percentile of its one-year range. Premiums are baking in daily moves of $1.92 or 1.9%.
Apple (AAPL)
The latest round of trade war drama is taking a toll on Apple. But it’s more a volatility penalty than anything. AAPL stock remains somewhat close to its 52-week highs, but the daily shake-n-bake is giving shareholders wicked whiplash. Against such a backdrop, divining daily direction is a fool’s errand.
That said, there are a few price zones worth keeping an eye on. Major support sits at $193, and resistance resides near $214. Until either threshold is broken, I suggest banking on the choppy behavior to continue.
On the options trading front, demand was split evenly between calls and puts Friday. Activity climbed to 183% of the average daily volume, with 1,013,076 total contracts traded.
Implied volatility rocketed to 36% pushing to the 53rd percentile of its one-year range. That means premiums are officially high and selling options is attractive. Iron Condors aren’t a bad way to go if you think the new range continues.
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.
