U.S. stock futures are pushing higher this morning. Heading into the open, futures on the Dow Jones Industrial Average are up 0.21%, and S&P 500 futures are higher by 0.24%. Nasdaq-100 futures have added 0.27%.
In the options pits, overall volume fell dramatically, particularly with puts. By day’s end, only about 15.6 million calls and 13.3 million puts changed hands on the session.
The action at the CBOE was equally lackluster with the single-session equity put/call volume ratio printing 0.65 for the second day in a row. Meanwhile, the 10-day moving average continued its rise with a reading of 0.63.
Big names atop the options trading leaderboard included Advanced Micro Devices (NASDAQ:AMD), Salesforce (NYSE:CRM) and Facebook (NASDAQ:FB).
Let’s take a closer look:
Advanced Micro Devices (AMD)
Advanced Micro Devices saw heavy inflows in the options market, but you wouldn’t know it if you looked at its price chart. Shares of the popular chip stock have been stuck in a narrow range for six weeks now, and Monday ended with a small-bodied candle on below-average volume.
Despite the dull session, we saw some excitement on the options trading front. Total activity surged to 243% of the average daily volume, with 535,507 contracts traded. Calls led the charge accounting for 84% of the day’s take.
Implied volatility continued its recent ramp from 52-week lows and now sits at 49% or the 16th percentile of its one-year range. Premiums are baking in daily moves of 95 cents or 3.1%.
One of the bright spots of AMD stock’s trading range is it creates easy levels to trade off of. Resistance at $32 and support at $29.50 are the zones to watch. A break of either one could create a profitable trading opportunity in either direction.
Salesforce (CRM)
Salesforce shares have been stuck in a sloppy range for nine months. Directionless spin has created quite the frustrating backdrop for trend traders. There simply hasn’t been a trend to trade! But recent patterns suggest a breakout could be looming.
Normally, volatility patterns alternate between periods of compression and expansion. Stocks pause, run and pause again. Well, CRM stock has held its pausing pattern longer than most would have predicted. All it needs is a spark to kick-start its next trend.
The past month has seen multiple tests of overhead resistance. If it can break above $158.50, we could see some nice upside follow through.
On the options trading front, traders came after calls on Monday. Activity climbed to 129% of the average daily volume, with 77,530 total contracts traded; 74% of the trading came from call options alone.
In light of CRM’s lack of direction, implied volatility has descended to a lowly 28% or the 14th percentile of its one-year range. Options are cheap, making long premium plays the way to go. I like bull call diagonals or something that profits from time decay so that if CRM continues treading water, you still benefit.
Facebook (FB)
Facebook shares came tantalizingly close to a breakout on Friday, but the attempt to burst above $191 ultimately failed. And yesterday saw enough downside follow through to punish all of the breakout buyers. It appears FB stock might need some more time before its uptrend resumes.
Watch for a close above $191 or below $184.50 to signal the direction of its next move.
As far as options trading goes, calls outpaced puts by two-to-one despite the day’s drubbing. Activity ticked up to 111% of the average daily volume, with 194,150 total contracts traded.
The uptick in demand did drive implied volatility higher on the day to 28%, placing it at the 20th percentile of its one-year range. With earnings coming in about a month, implied volatility has likely bottomed for this cycle and will head higher over the coming weeks. That means options premiums should expand as the uncertainty gets priced in.
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.
