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Wednesday’s Vital Data: Nike, Snap and Tesla

Options activity provides a look at expectations on TSLA, SNAP and NKE stock

U.S. stock futures are circling unchanged this morning. Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.02% and S&P 500 futures are higher by 0.03%. Nasdaq-100 futures have lost 0.03%.

Wednesday's Vital Data: Nike, Snap and Tesla
Source: Shutterstock

In the options pits, put trading spiked sharply yesterday, helping to drive overall volume well above average levels. Specifically, about 20.1 million calls and 21.1 million puts changed hands on the session.

At the CBOE, the single-session equity put/call volume ratio popped to 0.70 — a three-week high. That said, there wasn’t as much zip to the jump as you’d want to see to signal big fear. Despite all the dramatic headlines surrounding the impeachment talk, trader’s aren’t all that fearful.

Three of the biggest names on the most-active options leader board were Nike (NYSE:NKE), Snap Inc (NYSE:SNAP) and Tesla (NASDAQ:TSLA).

Let’s take a closer look:

options trading chart

Nike (NKE)

Nike smashed earnings estimates during last night’s report and is rallying to record highs this morning. If the after-hour gains hold, NKE stock will open 5% higher near $92.

For the fiscal first quarter, the company posted earnings-per-share of 86 cents on $10.66 billion in revenue. Analysts were looking for earnings of 70 cents on revenue of $10.44 billion. The big-league beat was driven by strong e-commerce sales and growth in their women’s business segment.

NKE shares have been stuck in a range for most of the year with heavy resistance at $90. Bulls should celebrate today’s long-awaited breakout if it holds. It sets the stage for a run toward $100.

On the options trading front, calls outpaced puts by a slim margin. Activity ballooned to 801% of the average daily volume, with 137,954 total contracts traded.

Options premiums were pricing in a move of $4.20 or 4.8% ahead of the event. That makes this morning’s 5% jump right in-line with expectations and suggests neither volatility buyers or sellers will depart with a win this go around. Look for the usual implied volatility crush at the open.

Snap Inc (SNAP)

Snap Inc soared out of the gate on Tuesday after scoring an upgrade from Guggenheim analyst Michael Morris. The rating shift to buy from neutral came with a boost in SNAP stock’s price target to $22. Unfortunately, the impeachment drama and weak stock market soured the morning gains and SNAP returned to unchanged on the day.

Had the good news come on any other day, I suspect the profits would have held. In any case, the stock’s chart still looks bullish across all time frames. The 200-day, 50-day and 20-day moving averages are cruising higher. Watch for a breakout over $18.36 to signal the next leg of its uptrend has begun.

As far as options trading goes, the upgrade lit a fire under call demand. Total activity jumped to 250% of the average daily volume, with 313,585 contracts traded; 79% of the trading came from call options alone.

Implied volatility rallied on the day to 59% and is now at the 22nd percentile of its one-year range. Premiums are pricing in daily moves of 63 cents or 3.7% so set your expectations accordingly.

Tesla (TSLA)

Tesla shares plunged 8% amid heavy volume yesterday, making it one of the hardest-hit growth stocks of the day. While the weak backdrop for equities certainly contributed to the decline, the primary culprit was likely a lawsuit by Tesla shareholders surrounding the company’s purchase of SolarCity.

According to a Reuters report, Elon Musk “urged investors to approve the 2016 purchase of SolarCity at a big premium to its market value despite knowing the solar installer faced a cash crunch and publicly stating he had recused himself from involvement in the deal.”

The price drop pushes TSLA stock back below its 50-day and 20-day moving averages, upending much of the rally seen over the month. It now sits in technical no-man’s land. The next support lies at $210, so consider the next downside target.

On the options trading front, investors favored puts on the day. Activity swelled to 180% of the average daily volume, with 328,156 total contracts traded. Puts accounted for 56% of the session’s sum.

Implied volatility rose to 58% or the 23rd percentile of its one-year range. They’re still cheap on a historical basis, so if you think more downside awaits, then long puts or put spreads are attractive.

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.

Article printed from InvestorPlace Media,

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