U.S. stock futures are headed for a quiet open. In early morning trading, futures on the Dow Jones Industrial Average are down 0.18% and S&P 500 futures are lower by 0.07%. Nasdaq Composite futures have gained 0.08%.
Yesterday’s push to new record highs in the S&P 500 drummed up call interest while put popularity fell by the wayside. By day’s end, about 20.3 million calls and 14.8 million puts changed hands on the session.
The wide disparity between calls and puts led to a significant development at the CBOE. The single-session equity put/call volume ratio matched its lowest reading of the year at 0.51, reflecting strong optimism amid options traders. Meanwhile, the 10-day moving average dropped to 0.65.
Options activity saw heavy call trading in Fitbit (NYSE:FIT), Pfizer (NYSE:PFE) and, surprisingly, Twitter (NYSE:TWTR).
Let’s take a closer look.
Fitbit (FIT)
Source: ThinkorSwim
Fitbit made a rare appearance at the top of the most-active options leaderboard Monday after news hit that Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) made an offer for the company. Reuters reported the development, but notably absent in the piece was the actual buyout price. Negotiations are ongoing, and so the usual uncertainty surrounding the deal should be noted.
At any rate, the possibility of a deal has FIT stock soaring. After trading up as high as 45%, Fitbit shares fell back to end the day up 35%. The rally launched it back above the 200-day moving average for the first time since April. Shares have given up about 0.5% since the start of trading this morning.
On the options trading front, trader interest in calls surged. Total activity climbed to 862% of the average daily volume, with 150,953 total contracts traded. 70% of the trading came from call options alone.
The increased demand drove implied volatility higher to 128%, placing it at the 100th percentile of its one-year range. Premiums are pricing in a $2.08 move over the next month, which translates into 37% higher or lower.
Pfizer (PFE)
Source: ThinkorSwim
Pfizer took its turn in the earnings spotlight this morning. For the quarter, the pharmaceutical giant earned 75 cents per share on revenue of $12.7 billion. Both measures topped forecasts and buyers are responding enthusiastically. PFE stock is currently trading up 3% to $38.57.
With the gains, PFE will complete and confirm its recent bottoming pattern. The ascending triangle pattern shows a passing of the baton from sellers to buyers, and with this morning’s rally, the stage is set for a run toward the 200-day moving average at $40.
Options trading ahead of this morning’s event saw traders chasing calls. Activity popped to 384% of the average daily volume, with 119,907 total contracts traded. Calls accounted for 68% of the day’s take.
Premiums were baking in a move of $1.01 or 2.7% so this morning’s surge is right in line with expectations.
Twitter (TWTR)
Twitter fell for its third straight day after its dismal quarterly report. All told, the social media darling has now fallen 23% in response to the underwhelming numbers. And with that, almost all of this year’s once-beefy gains have now evaporated.
The next two support zones at $30 and $26 are quickly coming into play. Momentum has slowed over the past two sessions, so watch for a break of the prior day’s high to signal a pivot low has formed. Then, if you’re in the mood for bottom fishing, naked puts could be worth a shot. I like selling the Dec $27 puts for around 50 cents.
Despite Monday’s slide, options trading saw call options lead the way. Activity climbed to 148% of the average daily volume, with 123,777 total contracts traded. Calls added 69% to the session’s sum.
The post-earnings unwinding continued with implied volatility. It now sits at 16% or the 37th percentile of its one-year range. Premiums are pricing in daily moves of 70 cents or 2.3%.
As of this writing, Tyler Craig held bullish positions in TWTR. For a free trial to the best trading community on the planet and Tyler’s current home, click here!
