U.S. stock futures are pushing through resistance this morning on positive trade war developments. The U.S. and China agreed to meet next month to continue trade negotiations. The news is all buyers needed to send stock futures to a one-month high, departing the recent trading range that has been vexing traders for weeks.
Ahead of the bell, futures on, the Dow Jones Industrial Average are up 1.06%, and S&P 500 futures are higher by 0.95%. Nasdaq-100 futures have added 1.18%.
In the options pits, yesterday’s rally boosted call volumes above recent average levels. Approximately 16.9 million calls and 15.8 million puts changed hands on the session.
The pop in call activity was felt at the CBOE, with the single-session equity put/call volume ratio slid to 0.68. That places it right in line with its 10-day moving average and the center of its 2019 range.
Options traders focused on analyst actions yesterday. Roku (NASDAQ:ROKU) saw renewed options interest after a price target hike to $185. Intel (NASDAQ:INTC) benefited from an industry-wide surge in semiconductors. Finally, Activision Blizzard (NASDAQ:ATVI) was flooded with activity after BMO boosted its rating and price target to $60.
Let’s take a closer look:
Roku (ROKU)
Just when you think its time for red-hot Roku shares to cool, they find the energy for another leg higher. This time the catalyst came in the form of a price target increase by D.A. Davidson analyst Tom Forte. Citing his increased conviction in the company’s positioning for changes in the industry, Forte boosted his target from $135 to $185.
Roku shares rallied 7.5% and are now up 412% this year alone. Buyers flocked to ROKU throughout the session driving its volume to nearly three times the average. With 28.52 million shares traded, Wednesday’s activity eclipsed the volume seen after last month’s earnings announcement.
Options trading exploded alongside the rally with calls leading the charge. Activity swelled to 307% of the average daily volume, with 353,057 total contracts traded. 57% of the trading came from call options alone.
The increased demand drove implied volatility higher on the day to 65% placing it at the 30th percentile of its one-year range. Premiums are now baking in daily moves of $6.95 or 4.1%.
Intel (INTC)
Semiconductor stocks were the big winners on Wednesday with many leaders blasting through recent resistance zones. Intel saw increasing volume during its 4% rally, revealing institutional accumulation.
Ever since getting smashed after April’s disappointing earnings release, INTC stock has been floundering. Days like yesterday offer a glimmer of hope to wounded shareholders. The stock breached a horizontal resistance zone at $47.50, reclaiming the high ground above its 50-day moving average.
Further gains should return Intel to its six-month peak of $53.
On the options trading front, calls outpaced puts by a wide margin. Total activity zoomed to 314% of the average daily volume, with 166,773 contracts traded. Calls contributed 69% to the day’s take.
Implied volatility fell to 29% or the 36th percentile of its one-year range. Premiums are pricing in daily moves of 89 cents.
Activision (ATVI)
Activision shares are awakening, and options traders are taking note. Yesterday’s 5% jump was driven by BMO upgrading its outlook from “market perform” to “outperform,” and raising its price target from $43 to $60. The breakout completes a nearly year-long rounded bottoming pattern that could propel the stock higher for months to come.
Optimism surrounding the company’s restructuring efforts, the recent release of “World of Warcraft Classic” and upcoming “Call of Duty: Modern Warfare” game are behind the budding stock recovery.
On the options trading front, traders came after calls with a vengeance. Activity rose to 291% of the average daily volume, with 91,917 total contracts traded. 81% of the trading came from call options alone.
Implied volatility is in the basement at 36% placing it at the 17th percentile of its one-year range. Cheap premiums are increasing the appeal of long calls or call spreads.
As of this writing, Tyler Craig held bearish options positions in ROKU and bullish options positions in ATVI. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.
