Friday’s Vital Data: United States Steel, Microsoft and Disney

Options activity provides a look at expectations on X, MSFT and DIS stock

U.S. stock futures are trading higher this morning after yesterday’s failed attempt by the S&P 500 to break above its record peak.

Friday's Vital Data: United States Steel, Microsoft and Disney
Source: Shutterstock

Heading into the open, futures on the Dow Jones Industrial Average are up 0.22%, and S&P 500 futures are higher by 0.20%. Nasdaq-100 futures have added 0.32%.

In the options pits, calls led the way, helping to keep overall volume slightly above average levels. Specifically, about 20.9 million calls and 16.8 million puts changed hands on the session.

Meanwhile, over at the CBOE, the single-session equity put/call volume ratio fell slightly to 0.67, but remains near its one-month high. The 10-day moving average turned higher, rallying back to 0.61.

Let’s take a closer look at the hottest stocks in the options pits:

options trading chart

United States Steel (X)

United States Steel (NYSE:X) shareholders woke up to a nasty surprise Thursday. The company updated its earnings guidance for the third quarter to a loss of 35 cents per share. Analysts were only expecting a loss of 7 cents per share. The dramatic drop caused Macquarie analysts to downgrade X from Outperform to Underperform and cut its price target from $18 to $9.

The price trend for United States Steel shares has been bearish all year long. With yesterday’s whack, X is now down 39% year-to-date.

On the options trading front, puts outpaced calls on the session. Total activity ramped to 321% of the average daily volume, with 166,869 contracts traded. Puts accounted for 53% of the day’s take.

Implied volatility rallied on the day to 61%, placing it at the 66th percentile of its one-year range. Premiums are baking in daily moves of 43 cents or 3.9%.

Microsoft (MSFT)

Microsoft (NASDAQ:MSFT) shares jumped to a new record high amid heavy volume Thursday after the company announced a $40 billion buyback and 5 cent increase in its dividend. Although the gains were pared by the closing bell, MSFT stock still ended the day up 1.8% on its largest volume session in a month.

The price trend for MSFT this year has been consistently bullish with many trading opportunities along the way. Yesterday’s breakout completed a textbook symmetrical triangle that signaled the stock was well-rested and ready to run. If you’re looking to bank on a year-end rally in the market, then Microsoft has to be on your radar.

As far as options trading goes, calls were the hot ticket on a day that saw activity push past two-and-a-half times the average daily volume. By day’s end, 515,991 contracts changed hands with 68% coming from calls alone.

The steadiness of Microsoft’s trend has kept a lid on implied volatility for months. It fell further to 22% or the 12th percentile of its one-year range. With options officially on sale, strategies like long calls or bull call spreads are a smart way to bet on the more upside in the stock.

Disney (DIS)

Ever since last month’s underwhelming earnings report, Disney (NYSE:DIS) shares have floundered. And Thursday’s 2.6% drop certainly isn’t helping matters. The selling pressure emerged after Imperial Capital analyst, David Miller updated his outlook on the Mouse House by cutting the price target from $140 to $139 and reaffirming an in-line rating. He also shaved his fourth-quarter earnings-per-share estimate by 2 cents.

The ongoing price weakness has been sufficient in turning the short-term and intermediate trends neutral. DIS stock is now submerged beneath the 50-day and 20-day moving averages. Support at $130 is the next logical stop if the descent continues.

On the options trading front, calls outpaced puts despite the day’s drubbing. Activity jumped to 244% of the average daily volume, with 138,990 total contracts traded. Calls added 76% to the session’s sum.

Implied volatility lifted to 22% but remains low at the 24th percentile of its one-year range. Premiums are pricing in daily moves of $1.88 or 1.4%.

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


Article printed from InvestorPlace Media, https://investorplace.com/2019/09/fridays-vital-data-united-states-steel-microsoft-and-disney/.

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