U.S. stock futures are quietly circling unchanged this morning. The pause comes after Monday delivered a bullish start to the week with the S&P 500 a whisper from new record highs.
Ahead of the bell, futures on the Dow Jones Industrial Average are flat and S&P 500 futures are higher by 0.13%. Nasdaq Composite futures have added 0.3%.
In the options pits, put volume dropped like a rock, weighing down overall volume levels to well below average. Specifically, about 17 million calls and only 13 million puts changed hands on the session.
As expected, normalcy returned to the CBOE Volatility Index (VIX), with the single-session equity put/call volume ratio slamming back down to 0.64. Meanwhile, the 10-day moving average reversed course, falling to 0.66.
Options traders zeroed in on a handful of marquee names, including JPMorgan Chase (NYSE:JPM), Apple (NASDAQ:AAPL) and Advanced Micro Devices (NASDAQ:AMD).
Let’s take a closer look.
JPMorgan Chase (JPM)
Source: ThinkorSwim
Quarterly earnings season for the bank stocks has come and gone. And many are rallying higher in the aftermath. JPMorgan Chase is the best looking of the bunch and logged a 2.5% gain Monday on above-average volume. The move pushed JPM stock to a record high at $123.55, lengthening its year-to-date profits to 27.6%.
The breakout lit a fire in the options market, driving overall activity to 158% of the average daily volume. Puts led the way despite the bullish session while the total number of contracts traded grew to 117,314.
With uncertainty and fear easing, implied volatility fell to a two-month low at 20% or the 14th percentile of its one-year range. Premiums are officially cheap and pricing in daily moves of $1.59 or 1.3%. Long call spreads are worth consideration.
On the price trend front, JPM is firing on all cylinders. As with any stock at new highs, JPM is flying above a rising 20-day, 50-day and 200-day moving average. Momentum is also increasing. While some backing and filling may be coming to digest its overbought conditions, the stock is a buy into any weakness.
Apple (AAPL)
Source: ThinkorSwim
Apple is mirroring the strength of JPM shares. Buyers are flocking to the tech titan and have officially pushed it to unseen heights. Monday’s rally cleared short-term resistance taking AAPL stock up 1.9%. Its trend momentum is surging amid increased optimism ahead of next week’s earnings report.
On the options trading front, calls outpaced puts by a modest margin. Total activity only grew to 107% of the average daily volume, with 544,463 contracts traded. Nevertheless, it still landed atop the most-active leader board. 61% of the trading came from call options alone.
Despite earnings coming quickly around the corner, implied volatility has been pushing lower over the past week. The move suggests traders don’t expect much movement on the news. The reading rests at the 31st percentile of its one-year range, which is lower than its been heading into earnings over the past few years.
Time will tell if the complacency is justified, but you’re not getting paid much to sell premium ahead of the event.
Advanced Micro Devices (AMD)
Source: ThinkorSwim
Advanced Micro Devices was once the belle of the momentum ball, but then it fell asleep. For those that requested notification when it finally awoke, well, here’s your heads up. AMD popped above resistance last week and has been trekking higher ever since. It’s now back above its 50-day moving average and looks more bullish than at any time since August.
The challenge with confidently deploying bullish bets is next Tuesday’s earnings release, which elevates the range of potential outcomes. Maybe AMD tops estimates and surges. Or perhaps it whiffs and plunges. Such is the uncertainty surrounding these quarterly rituals.
That said, with the long-term trajectory of its trend, I’d rather lean bullish than bearish. Naked puts would be my weapon of choice here.
On the options trading front, traders fell in love with calls throughout the day. The activity ended near normal average volume levels, with 279,082 contracts changing hands. Calls dominated the discussion, driving 68% of the tally.
Implied volatility has been sinking during the stock’s rally and now sits at 56% or the 27th percentile of its one-year range. Premiums are baking in daily moves of $1.13 or 3.5%.
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!
