Thursday’s Vital Data: CVS Health, Disney and Bank of America

Options activity provides a look at expectations on CVS, DIS and BAC stock

U.S. stock futures are trading higher in a continuation of yesterday’s rally.

Thursday's Vital Data: CVS Health, Disney and Bank of America
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Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.34%, and S&P 500 futures are higher by 0.36%. Nasdaq-100 futures have added 0.47%.

In the options pits, soaring put volume revealed yet another panic surge. By day’s end, some 22.3 million calls and 23.8 million puts traded, pushing overall trading numbers well above average.

Meanwhile, at the CBOE, the single-session equity put/call volume ratio held steady at 0.78. The 10-day moving average rallied to a fresh high for 2019 at 0.74.

Options traders swarmed companies with quarterly reports, including CVS Health (NYSE:CVS) and Disney (NYSE:DIS). Elsewhere, Bank of America (NYSE:BAC) saw heavy call volume alongside its bullish price reversal.

Let’s take a closer look:

options trading

CVS Health (CVS)

CVS Health delivered numbers worth celebrating during Wednesday morning’s earnings report. For the second quarter, the healthcare behemoth posted revenue of $63.4 billion marking a strong 35.2% increase versus the year-ago period. That translated into adjusted earnings-per-share of $1.89, which was 11.8% higher than last year’s second-quarter showing.

The company also raised its guidance for the year revealing optimism for the months ahead.

Demand for CVS stock surged throughout the session driving the shares up 7.45%. The rally places CVS on the cusp of completing a five-month rounded bottom pattern that could put a floor in the downtrend and set the stage for additional upside. The next upside target is the 200-day moving average near $61.50.

On the options trading front, traders favored calls throughout the session. Total activity rocketed to 321% of the average daily volume, with 139,201 contracts traded. Calls claimed 61% of the day’s take.

The post-earnings volatility crush was on full display with implied volatility plunging to 29%. That places it at the 33rd percentile of its one-year range and reduces the expected daily moves to $1.08 or 1.9%.

Disney (DIS)

Disney suffered its worst down day since 2015 after underwhelming earnings results. For the quarter the mouse house posted profits of $1.35 per share falling well short of analysts’ estimates of $1.75. Multiple negatives contributed to the shortfall, including low foot traffic to its domestic parks and increased spending on movies and TV shows as the company gears up for its release of Disney+ later this year.

DIS stock traded down as much as 6.8% before rallying back to close 4.9% lower. The slip pushed DIS well below its 50-day moving average, turning the daily trend lower. That said, the big picture remains bullish for the stock. Its weekly uptrend is still intact and many support levels loom beneath. Like every single dip in its history, this one should ultimately prove a buying opportunity.

On the options trading front, traders still favored calls throughout the day. Activity swelled to 262% of the average daily volume, with 279,869 total contracts traded. 68% of the trading came from call options alone.

Implied volatility dropped to 25% or the 40th percentile of its one-year range. Derivative prices are now baking in daily moves of $2.10 or 1.6%, so adjust your expectations accordingly.

Bank of America (BAC)

Financial stocks have suffered alongside everything else during the market rout. Bank of America’s peak-to-trough correction grew to 12.7% at yesterday’s low, but buyers emerged to push BAC stock well above its opening price by the closing bell.

While BAC now has a hammer candlestick that provides the opportunity for a short-term upside reversal, its trend remains as uninspiring as ever. The seven-month trading range housing the stock has prevented an uptrend or downtrend from forming, and at this stage, it looks as strong as ever. With BAC approaching the lower end of the box, this is the area where buyers have emerged in the past.

On the options trading front, calls outpaced puts for the day. Total activity climbed to 159% of the average daily volume, with 384,314 contracts traded. Calls accounted for 61% of the session’s sum.

The increased demand drove implied volatility higher on the day to 31% placing it at the 46th percentile of its one-year range. Premiums are baking in daily moves of 55 cents or 2%.

As of this writing, Tyler Craig held bullish positions in DIS. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

Article printed from InvestorPlace Media,

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