U.S. stock futures are inching lower this morning while gold and bonds continue to rally. The messy price action continues to keep big buyers at bay. Small-caps enter the session on precarious footing with the Russell 2000 Index testing a major year-long support zone. A failure here would send another warning signal across the land.
Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.06%, and S&P 500 futures are lower by 0.04%. Nasdaq-100 futures have shed 0.14%.
In the options pits, we saw a mild uptick in overall volume levels with calls leading the way. Approximately 16.9 million calls traded versus only 14.9 million puts.
With the gap between the two narrowing, the CBOE single-session equity put/call volume ratio rallied back to 0.64. Meanwhile, the 10-day moving average slipped to 0.72.
Barrick Gold (GOLD)
Recession fears continue to fuel precious metals higher. And gold stocks are rallying alongside the shiny stuff. Barrick Gold climbed another 2.75% to a two-year high on above-average volume. GOLD stock is now up 46% year-to-date.
Spectators wondering how much further GOLD can run should remember this was a $56 stock in 2011. So massive upside is possible if the new gold bull market goes the distance. The weekly time frame has plenty of resistance in the $21 to $23 zone, so that’s the next upside target.
On the options trading front, calls were hot throughout the session. Total activity roared to 445% of the average daily volume, with 165,023 contracts traded; 83% of the trading came from call options alone.
The increased demand drove implied volatility higher on the day to 41%, placing it at the 65th percentile of its one-year range. With the metric in the upper half of its range, premiums are officially ripe for the selling.
Activision shares ripped 6% Tuesday after the company re-released “World of Warcraft Classic” to much fanfare. The viewership on Twitch reached over one million viewers setting a new record and revealing just how excited the gaming community is over the release.
Options traders were excited as well. Calls outpaced puts by the same margin as GOLD, accounting for 83% of the session’s sum. Activity rocketed to 420% of the average daily volume, with 111,829 total contracts traded.
Implied volatility saw some signs of life, but the lift wasn’t all that much. The metric sits at 39% or the 25th percentile of its one-year range. Long premium plays are attractive here. That means long calls or call verticals if you’re bullish, or long puts or put verticals if bearish.
The price chart of ATVI stock scored a breakout, finally eclipsing the $50 resistance zone, which has held firm all year long. Bulls have their best chance in a year to kickstart a solid uptrend.
Roku is becoming a mainstay atop the options trading leaderboard. Its meteoric rise continued Tuesday, pushing the hot streaming media company to another record high with the day’s 2.8% ascent. The eye-popping year-to-date gain now stands at 380%. A glowing article from Barrons is helping to stoke the fire.
Perhaps the most powerful aspect of ROKU stock’s behavior is its ability to completely detach itself from the broader market weakness. Its earnings and subscriber growth has been strong enough to keep it above the muck that so many other companies are now mired in. Someday the recession fears may matter, but for now, ROKU investors aren’t betting on it.
On the options trading front, traders favored calls throughout the day. Activity grew to 149% of the average daily volume, with 150,344 total contracts traded. Calls accounted for 58% of the take.
Fear and uncertainty are nowhere to be found. The implied volatility sits at 58% or the 20th percentile of its one-year range. Premiums are pricing in daily moves of $5.34 or 3.6%.
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.