Thursday’s Vital Data: Aurora Cannabis, Boeing and Apple

Options activity provides a look at expectations on ACB, BA and AAPL stock

U.S. stock futures are extending yesterday’s gains. The big boost came last night when President Trump announced via Twitter a delay in the planned increase of tariffs toward China.

Thursday's Vital Data: Aurora Cannabis, Boeing and Apple
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Heading into the open, futures on the Dow Jones Industrial Average are up 0.22%, and S&P 500 futures are higher by 0.22%. Nasdaq-100 futures have added 0.63%.

Wednesday’s optimism in equities spilled into the options pits with call volume running hot. Approximately 22.4 million calls and 18.6 million puts changed hands on the session. The call surge made waves at the CBOE as well. The equity put/call volume ratio dropped to 0.54, while the 10-day moving average dropped toward 0.62 — a six-week low.

Options activity was a mixed bag on Wednesday (Options traders zeroed in on analyst actions yesterday). Aurora Cannabis (NYSE:ACB) saw renewed options interest ahead of fourth-quarter earnings, which disappointed. Boeing (NYSE:BA) boomed to a five-month high on strong volume. Finally, Apple (NASDAQ:AAPL) rallied to a new 2019 high after unveiling its Apple TV+ service.

Let’s take a closer look:

options trading

Aurora Cannabis (ACB)

A powerful rally carried Aurora Cannabis into last night’s earnings release. Unfortunately, the optimism was misplaced and ACB stock is trading down 10.5% premarket. For the fourth quarter, the Canadian Cannabis company posted net revenue of C$98.9 million, which came in below the range Aurora Cannabis forecasted just last month.

The adjusted EBITDA loss was C$11.7 million. Last quarter, the company had stated they expected positive earnings for Q4.

On the bright side, because ACB stock experienced a run-up ahead of the number, this morning’s thrashing is only returning its price to Monday’s low. Continued weakness could lead to a retest of its 52-week low at $5.38, though.

As far as options trading goes, traders were chasing calls throughout the session. The mad dash pushed total activity to 325% of the average daily volume, with 123,106 contracts traded. Calls accounted for 75% of the day’s take.

Pumped up premiums were pricing in an earnings gap of 72 cents or 11%. So, with ACB set to open down just shy of 11%, I’d say the derivatives market absolutely nailed the move — three cheers for market efficiency.

Boeing (BA)

Boeing shares exploded higher yesterday, breaking a key short-term resistance zone. Volume pushed to 8.4 million shares reflecting a buying stampede. The culprit seems to be the ongoing rotation seen in the overall market. Over the past week, we’ve seen many leaders lag while laggards have led.

This week’s behavior in BA stock provides a teachable moment. My morning Google search revealed a spate of ominous-sounding news headlines for the wounded Aerospace company. Here are a few: “When Does Patience Run Out for Boeing Stock?,” “New Blow for Boeing,” and  “The Boeing 777x Suffers Another Setback.” And yet, despite the drama, BA stock is booming over the last two trading sessions, proving once again that news is often noise and price is king.

BA now sits above all major moving averages and has seen a ton of improvement in volume patterns. Distribution days have disappeared, and accumulation is making a comeback. Consider $400 the next upside target

On the options trading front, calls outpaced puts by a modest margin. Activity swelled to 209% of the average daily volume, with 174,949 total contracts traded. Calls added 63% to the session’s sum.

Fear and uncertainty have all but unwound. Implied volatility tumbled to 27% or the 21st percentile of its one-year range. Premiums are now baking in daily moves of $6.50 or 1.7%.

Apple (AAPL)

After a volatile ride post-earnings, Apple shares are back to booming. The stock rocketed 3.2% higher yesterday finally eclipsing a ceiling which had kept a lid on it for four months. Volume soared alongside the rally with over 44.3 million shares changing hands.

With resistance cleared, AAPL stock is now positioned to attack last year’s $233.47 peak. That’s your next upside target.

Not surprisingly, calls dominated the options trading. Total activity climbed to 206% of the average daily volume, with 933,345 contracts; 65% of the trading came from call options alone.

The improving price trend has taken the wind out of implied volatility’s sails. Yesterday it dropped to 26% or the 22nd percentile of its one-year range. With premiums now only pricing in daily moves of $3.63 or 1.6%, buying options is better than selling them right now.

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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