Thursday’s Vital Data: Ford, Cisco and JPMorgan Chase

Options activity provides a look at expectations on F, CSCO and JPM stock

U.S. stock futures are circling unchanged this morning as uncertainty swirls following Wednesday’s high volume plunge. Heading into the open, futures on the Dow Jones Industrial Average are up 0.10%, and S&P 500 futures are higher by 0.15%. Nasdaq-100 futures have added 0.21%.

Thursday's Vital Data: Ford, Cisco and JPMorgan Chase
Source: Shutterstock

In the options pits, put volume rocketed to the moon as fearful traders aggressively bid for protection. Approximately 20.1 million calls and 25.5 million puts traded by day’s end.

The fear fest made waves at the CBOE as well, with the single-session equity put/call volume ratio jumping to 0.84. It now stands near its 2019 high and is confirming panic is in the air. The 10-day moving average pushed to 0.70 — a new one-month high.

Quarterly dividend payouts boosted options trading in a variety of names on Wednesday, including Cisco (NASDAQ:CSCO) and JPMorgan Chase (NYSE:JPM). Elsewhere, traders slammed Ford (NYSE:F) shares following the release of weak sales metrics.

Let’s take a closer look:

options trading chart

Ford (F)

Ford stock took it on the chin yesterday after the automaker announced its U.S. sales slumped 4.9% in the third quarter. The weakness was particularly acute in demand for SUVs and F-series trucks. General Motors (NYSE:GM) fell 4% in sympathy.

Of course, some of Ford stock’s 3.3% whack could be due to the specter of a recession that now haunts the market. Wednesday’s beatdown in equities across the board was reason enough for an economically sensitive company like Ford to slip.

Source: ThinkorSwim

Its price chart cracked support and is pushing lower below all major moving averages. Distribution days have multiplied this month, revealing institutions are leaning on the sell button. The best thing we can say is it now boasts a juicy 6.97% dividend.

On the options trading front, put volume exploded throughout the day. Total activity grew to 371% of the average daily volume, with 184,172 contracts traded; 68% of the trading came from call options alone.

The increased demand jammed implied volatility up to 40% placing it at the 42nd percentile of its one-year range. Premiums are now pricing in daily moves of 22 cents or 2.6%.

Cisco (CSCO)

The rug-pull suffered by Cisco over the past two sessions is unfortunate. Its share price had been making strides in its bottoming effort after August’s post-earnings beatdown. But now it has all been unraveled, and CSCO stock is one banana peel away from crashing through key support at $46.

Source: ThinkorSwim

While the dramatic descent was reason enough for options traders to swarm, the real reason for the volume surge is Thursday’s ex-dividend date. As is typical of the day ahead of the quarterly dividend getting priced-in, cash flow seekers took to the options market for short-term control of the stock to have rights to the payout.

Holders of record for CSCO will receive a 35 cent dividend, which translates into a 3.01% yield. Calls led the charge on the session. Activity jumped to 182% of the average daily volume, with 91,999 total contracts traded. Calls accounted for 54% of the take.

Implied volatility rose to 32% and now sits at a lofty 61st percentile of its one-year range. Premiums are officially pumped, making short options strategies compelling.

JPMorgan Chase (JPM)

So much for last month’s breakout to record highs in JPM. The banking giant’s two-day plunge invalidated the break, which now appears to be a nasty bull trap. If the current test of its 50-day moving average doesn’t hold, then it won’t have a bullish leg to stand on, and sellers will have officially wrested control of the price chart.

Source: ThinkorSwim

Perhaps the Oct. 15 earnings announcement will arrive to save the day, but I have my doubts. The more immediate event, and the one that likely drew traders into the options market on Wednesday is today’s ex-dividend date. Shareholders are lining up for the next quarterly payment of 90 cents, which works out to a 3.20% yield.

Calls were the hot ticket on the day, driving 68% of the total trading. Activity ramped to 162% of the average daily volume, with 9107,116 contracts traded.

Implied volatility is working its way higher in anticipation of the Oct. 15 earnings announcement. At 27%, the reading is pricing in daily moves of $1.93 or 1.7%.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here

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