U.S. stock futures are holding steady this morning as equities try to find their footing after Wednesday’s nasty plunge. The Federal Reserve meeting delivered a quarter-point interest rate cut as expected, but Jerome Powell threw a curveball by announcing he viewed the easing as a “mid-cycle adjustment.”
Against this backdrop, futures on the Dow Jones Industrial Average are up 0.01% and S&P 500 futures are down by 0.04%. Nasdaq-100 futures have added 0.05%.
In the options pits, overall volume climbed well above average levels. Specifically, about 21.9 million calls and 19.8 million puts changed hands on the session.
The surge in call activity was enough to push the CBOE single-session equity put/call volume ratio off its six-week high. It ended at 0.62. Meanwhile, the 10-day moving average held its ground at 0.65.
Let’s take a closer look:
General Electric (GE)
General Electric topped the most-actives list following its earnings release. The raucous day saw pops, drops and volatility galore. But, the session ended seeing the stock down a scant 0.07%. For the quarter, the company saw adjusted earnings-per-share of 17 cents on revenue of $28.83 billion. Both measures topped FactSet consensus estimates for 12 cents on $28.68 billion.
The price chart of GE remains as messy as ever. Deteriorating fundamentals continue to weigh heavily on the stock, thwarting the many recovery attempts we’ve seen this year. On the other hand, the stability is a nice change of pace and signals the stock’s success in building a base that could serve as a foundation for its eventual recovery.
We need to see a breakout above $11 before bullish trades receive a green light. Until then, don’t waste your time.
On the options trading front, calls and puts proved equally popular. Activity rocketed to 496% of the average daily volume, with 511,651 total contracts traded.
Option premiums were pricing in a move of 65 cents or 6.2%, so the stock closing near unchanged provided profits to traders swinging short volatility trades into the event. Implied volatility sank to 37% placing it at the 21st percentile of its one-year range. Premiums are now pricing in daily moves of 24 cents or 2.3%.
Twitter took flight this week following bang-up second-quarter earnings. The company saw revenue jump to $841 million marking an 18% increase since last year. Monetizable daily users climbed 14% to 122 million users. Traders gifted TWTR stock with a one-day gain of 9%.
After two days of digestion, the rally continued yesterday with a sharp rise that was cut short by the post-Fed announcement swoon. Still, TWTR ended the day up 3.2% making it one of the best performers on a day where most stocks ended deeply in the red.
On the options trading front, traders came after calls with a vengeance. Activity grew to 260% of the average daily volume, with 238,886 total contracts traded. Calls claimed 78% of the day’s take.
The increased demand drove implied volatility higher on the day to 37% placing it at the 15th percentile of its one-year range. Premiums are pricing in daily moves of 99 cents or 2.3%.
Baidu shares slipped alongside the broader market, ending down just shy of 1%. With last quarter’s dreadful earnings showing still fresh in the minds of investors, BIDU stock has struggled to gain momentum in either direction since the May plunge.
Traders have entered wait-and-see mode ahead of the next quarterly report scheduled for Aug. 19. The two price levels to key in on are simply the high and low of BIDU’s three-month trading range. That’s $122 and $107, respectively. Until we see a break of either one, divining the direction of the stock’s next move is anyone’s guess.
What prompted Baidu’s inclusion to today’s piece was the huge amount of put volume. Total activity ballooned to 246% of the average daily volume, with 147,291 contracts traded; 92% of the trading came from puts alone.
Implied volatility drifted on the session at 35% or the 33rd percentile of its one-year range. The daily expected move remains at $2.48 or 2.2%.
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.