Monday’s Vital Data: JPMorgan Chase, Freeport-McMoran and Apple

Options activity provides a look at expectations on JPM, FCX and AAPL stock

Oil prices are flying after an attack on Saudi Arabia’s oil processing facility, and oil fields required the country to cut production by 50%. After a volatile overnight session, Crude oil futures are set to open up 10.5%. U.S. stock futures are trading lower amid the elevated uncertainty.

Monday's Vital Data: JPMorgan Chase, Freeport-McMoran and Apple
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Heading into the open, futures on the Dow Jones Industrial Average are down 0.37%, and S&P 500 futures are lower by 0.37%. Nasdaq-100 futures have shed 0.62%.

In the options pits, calls outpaced puts by a wide margin on Friday. Approximately 20.9 million calls and 16.3 million puts changed hands during the session. However, the distance between call and put volume narrowed at the CBOE, where the single-session equity put/call volume ratio rose to 0.62. Meanwhile, the 10-day moving average slipped just under 0.62 — a two-month low.

Options activity was elevated in a variety of stocks on Friday. JPMorgan Chase (NYSE:JPM) saw options volume jump alongside its breakout to record highs. Freeport-McMoRan (NYSE:FCX) continued to benefit from a rotation into metal and mining stocks. Finally, Apple (NASDAQ:AAPL) fell 1.9% after suffering a downgrade by Goldman Sachs (NYSE:GS).

Let’s take a closer look:

options trading

JPMorgan Chase (JPM)

The ongoing recovery in stock prices has been oh-so-good for JPMorgan shares. On Friday, the banking behemoth clinched a rousing breakout to record highs making it one of the best financial stocks on the Street to buy.

With the resistance breach, JPM stock completed long-term basing pattern that was almost two years in the making. The jump could kickstart its long-term trend, which had been stuck in neutral during the consolidation. In the short run, JPM is overextended having rallied eight days in a row. So, a pause or pullback would be a welcome development to provide lower-risk entries on the daily time frame.

The breakout sparked a flurry of activity on the options trading front. Popularity was split virtually 50-50 between calls and puts, and total activity zoomed to 235% of the average daily volume, with 139,772 contracts traded.

Implied volatility has been on a downward trajectory this month, falling to a six-week low. At 23%, it now sits in the lower quartile of its one-year range. That means options are cheap. Long calls or call spreads are the way to go if you’re speculating on further upside.

Freeport-McMoran (FCX)

Metal and mining stocks have awoken, and Freeport-McMoran is seeing some serious inflows. I count six accumulation days so far this month. FCX stock just had its best week of the year, rallying 14%. The surge carried the shares back above their 20-day and 50-day moving averages.

Unfortunately, much work remains before its long-term downtrend is fully reversed. The 200-day moving average still looms heavy overhead, and we’ve seen many rallies that have started with strength ultimately fail this year. That said, the volume signs and sector rotation into mining stocks certainly looks promising for a bottoming attempt in FCX.

On the options trading front, traders came after calls with a vengeance. Activity climbed to 214% of the average daily volume, with 105,602 total contracts traded. Calls ran the tables accounting for 86% of the day’s take. Implied volatility didn’t budge at all throughout the week, remaining at 43% or the 22nd percentile of its one-year range. Premiums are pricing in daily moves of 29 cents or 2.7%.

Apple (AAPL)

Just two days after launching to an eleven-month high, Apple suffered an unexpected downgrade by Goldman Sachs. The bank said Apple’s accounting plans for the launch of Apple TV Plus would shrink the iPhone’s profit margins and lowered the stock’s price target from $187 to $165.

The company issued a response stating, “we do not expect the introduction of Apple TV+, including the accounting treatment for the service to have a material impact on our financial results.”

Drama aside, AAPL stock was likely due for a pullback anyways. Friday’s 2.4% drop returned AAPL to its breakout zone providing another attractive entry for those that missed last Wednesday’s surge. Its price trend remains bullish with rising moving averages across time frames.

On the options trading front, traders favored calls on the session. Total activity climbed to 184% of the average daily volume, with 900,312 contracts traded; 56% of the trading came from call options.

The increased demand drove implied volatility higher on the day to 25% placing it at the 19th percentile of its one-year range. Premiums remain cheap and are pricing in daily moves of $3.44 or 1.6%.

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.

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