U.S. stock futures are headed for a quiet open. In early morning trading, futures on the Dow Jones Industrial Average are down 0.04%, and S&P 500 futures are lower by 0.1%. Nasdaq Composite futures have added 0.03%.
In the options pits, overall volume ticked higher with calls once again driving the bus. By day’s end, approximately 18.4 million calls and 15.3 million puts traded.
The domination of calls continued to put pressure on the CBOE Volatility Index (VIX) single-session equity put/call volume ratio, driving it down to 0.61 — a 1-week low. Meanwhile, the 10-day moving average slipped to a 3-week low just under 0.65.
Let’s take a closer look.
Biogen made a rare appearance atop the most-active options leaderboard after ripping higher thanks to a bombshell revelation and better-than-expected earnings. The biotech behemoth unveiled plans for seeking regulatory approval in the U.S. for its Alzheimer’s fighting drug, aducanumab. Previously, Biogen had halted a pair of trials for the drug dousing hopes that it would make it to this stage. That news is what caused the massive drop for BIIB stock in March.
As far as the price chart goes, even though BIIB ended up 26% on the day, it was a strong “sell the news” reaction. At the height of the day, shares were up 42%, so the intra-day selling was substantial. We now sit in the middle of March’s gap, a technical no man’s land, making it tricky to predict the direction or build a low-risk trade. I suggest giving BIIB a few days to digest the gain and form support and resistance levels to trade off of.
On the options trading front, puts proved more popular than puts on the day. Total activity skyrocketed to 1,550% of the average daily volume, with 159,717 contracts traded. 58% of the trading came from puts.
Implied volatility increased to 40% or the 76th percentile of its 1-year range. Premiums are officially juiced and baking in daily moves of $7.12 or 2.5%.
McDonald’s shares dropped 5% after the restaurant giant reported dismal earnings. For the quarter, MCD raked in $2.11 per share on revenue of $5.4 billion. Analysts were forecasting earnings of $2.21 on revenue of $5.5 billion.
Traders jettisoned the stock from their portfolios, driving MCD down 5% amid heavy volume. Over 10.3 million shares changed hands marking the second-highest volume session of the year. The technical picture is now officially ugly. Its daily uptrend is broken, and the 20-day and 50-day moving averages are both pointing lower. While I probably wouldn’t chase new bear trades at this stage, I certainly wouldn’t buy either. Time will be needed to heal the technical damage inflicted.
Options trading saw calls outpaced puts by a slim margin. Activity grew to 554% of the average volume, with 107,104 total contracts traded. Calls accounted for 53% of the take.
Implied volatility descended to 17% or the 15th percentile of its 1-year range. Traders now expect daily fluctuation of $2.16 or 1.1%.
Lyft shares received a much-needed boost after the company’s co-founders said it could turn a profit by the fourth quarter of 2021. The stock popped 6.5%, reversing its short-term downtrend. Previously, analysts were forecasting the popular ride-hailing service wouldn’t get into the black until 2022.
Since its post-IPO high of $88.60, LYFT stock had fallen as low as $37.07. Short of one small burst of bullishness in the summer, its share price has been soundly bearish since going public. Time will tell if Tuesday’s optimism has staying power. The 50-day moving average near $45 needs to be taken out before a more serious discussion on the intermediate-term trend turning can take place.
Next week’s earnings announcement on Oct. 30 should provide clarity.
Options trading saw huge call demand drive 68% of the session’s sum. Total activity climbed to 548% of the average daily volume, with 134,687 contracts traded.
As of this writing, Tyler Craig didn’t hold positions on any of the aforementioned securities. For a free trial to the best trading community on the planet and Tyler’s current home, click here!