U.S. stock futures are trading lower this morning as traders return to their turrets. The weakness in options trading continues the slide that ushered stocks into the weekend. Oil futures are the big mover this morning, rising over 1% after Saudi Arabia said weakening demand has prompted OPEC and its partners to cut oil output by half a million barrels a day.
Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.25% and S&P 500 futures are lower by 0.24%. Nasdaq-100 futures have shed 0.53%.
In the options pits, put volume lifted during Friday’s stock slide. Specifically, about 19.7 million calls and 21.1 million puts changed hands on the session.
The surge in put activity was felt at the CBOE, where the single-session equity put/call volume ratio rose to 0.80 — a two-week high. The 10-day moving average stayed firm at 0.66.
Options traders zeroed in on the titans of industry Friday. General Electric (NYSE:GE) saw its demise quicken after JPMorgan Chase (NYSE:JPM) cut its price target to $6. Disney (NASDAQ:DIS) options were hot as traders digested the company’s latest quarterly earnings. Finally, Apple (NASAQ:AAPL) shares slid on continued concerns of weakening iPhone XR sales.
Let’s take a closer look:
General Electric (GE)
Last month’s rousing rebound in GE following news of a CEO change is all but a distant memory. The ailing conglomerate saw its decline quicken on Friday after JPMorgan cut its price target from $10 to $6 citing the company’s latest quarterly earnings report. Analyst Stephen Tusa said GE’s performance was “worse than expected on almost all fronts.”
Year-to-date, the stock is down 51%.
On the options trading front, calls slightly outpaced puts on the day. Activity swelled to 261% of the average daily volume, with 1,095,059 total contracts traded. Calls contributed 54% of the total.
Implied volatility remains aloft at 57%, or the 80th percentile of its one-year range. Traders are pricing in daily moves of 3.6% so expect outsized swings to continue.
Disney (DIS)
Disney has been one of the lone winners amid a sea of losers. Wall Street cheered the entertainment king’s latest earnings numbers, though the gains were trimmed by days end.
After rallying as much as 3.6% to a three-year high, DIS stock ended Friday up by 1.72%. The gains have been added to over the weekend, however, with shares now up almost 1% in premarket trading.
The big news on its conference call was details surrounding its new streaming service slated for launch in 2019. “Our Disney-branded service, which we’re officially calling Disney+, will be in the U.S. market late next year, offering a rich array of original Disney, Pixar, Marvel, Star Wars and National Geographic content, along with unprecedented access to our incredible library of film and television content, including all of our new theatrical releases starting with the 2019 slate,” said CEO Bob Iger.
On the options trading front, traders came after calls with a vengeance. Activity rocketed to 403% of the average daily volume, with 177,651 total contracts traded. 67% of the trading came from call options alone.
Despite the demand surge, implied volatility fell on the day as traders rapidly removed earnings uncertainty. Implied volatility now rests at 23% or the 39th percentile of its one-year range. Traders are now pricing in daily moves of 1.4%.
Apple (AAPL)
Apple options continue to be active in the wake of its latest earnings report. Tepid forward guidance and a decision to no longer provide unit-sales numbers for its products are souring sentiment. As reported by The Nikkei Asian Review, weak sales of the iPhone XR have also prompted the company to cancel plans for additional production lines by its suppliers.
AAPL stock is down over 2% in premarket trading extending its peak-to-trough correction losses to 14.8%. A visit to its 200-day moving average near $190 could be in the offing over the coming weeks.
On the options trading front, volumes were just enough to push AAPL onto our screeners. Activity lifted modestly to 107% of the average daily volume, with 647,902 total contracts traded. Calls slightly outpaced puts contributing 53% to the day’s take.
Implied volatility settled at 27% into the weekend placing it at the 46th percentile of its one-year range. Traders are now pricing in daily moves of 1.7%.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.
