Wall Street is struggling to hold onto a positive open this morning after logging its fifth-straight weekly gain on Friday. Once again, weakness in oil prices is creating drag on stocks, with the lead contract down $1.22 at $38.96 per barrel at last check. As for equities, U.S. stock futures on the Dow Jones Industrial Average were last seen up 0.07%, while S&P 500 futures were higher by 0.04% and Nasdaq Composite futures were up 0.08%.
Options volume came in well above average on Friday, with Apple Inc. (NASDAQ:AAPL) leading the way on added March expiration activity. Calls were surprisingly popular on Friday, with the CBOE single-session equity put/call volume ratio dropping to 0.55 — its lowest point since September. The 10-day moving average, meanwhile, dipped to 0.7.
In equity options news, Apple options activity should be considerably brisk today, as the company kicks off a media event where many analysts will be looking for iPhone and iPad updates. Elsewhere, Bank of America Corp (NYSE:BAC) saw heavy options volume on Friday after the company upped its share buyback program, while Tesla Motors Inc (NASDAQ:TSLA) options traders are finally taking note of TSLA stock’s meteoric rise over the past month.
Apple Inc. (AAPL)
It’s nearly time for the speculation to end on Apple’s media event. The event will kick off later today, with Apple watchers expecting a new $599 9.7-inch iPad Pro and a new 4-inch iPhone SE. Apple also is expected to offer updates to its cloud services, as well as lower prices on older product lines to spur currently sluggish year-over-year growth.
Speculation is the lifeblood of short-term options traders, and Apple options traders are among the most active ahead of events like today’s. On Friday, AAPL saw more than 1.2 million contracts change hands, with calls accounting for an unusually elevated 71% of the day’s take.
In the weekly March 24 series, call traders have flooded the $105, $106, $107 and $110 strikes with open interest. The most popular is the in-the-money $105 strike, where more than 12,000 contracts reside, while the $110 strike comes in at a close second with just over 11,000 contracts in OI. Peak put OI for the series pales in comparison, totaling slightly more than 9,000 contracts at the $100 strike.
Bank of America Corp (BAC)
Bank of America boosted its share buyback program by $800 million on Friday. This adds to the banking giant’s already robust repurchase program of $4 billion. In addition to adding incentive for traders to once again look favorably on the shares, BofA’s move is also intended to offset share dilution resulting from compensation for retiring employees.
BAC options traders pounced on the news, sending more than 800,000 contracts across the tape on Friday. What’s more, calls were the investment vehicle of choice for BAC, with these typically bullish contracts accounting for a hefty 79% of the day’s take.
Turning to weekly March 24 series OI, the in-the-money $13.50 call strike sports the highest concentration of options for BAC, with more than 45,000 contracts in residence. The out-of-the-money $14 strike is also qutie popular, with nearly 26,000 call contracts open.
Given the spike in call volume on Friday, and the rise in OI at both these weekly strikes, it would appear that some options traders were opening fresh bull call spreads heading into this week. Technically, $14 remains a significant hurdle for BAC.
Tesla Motors Inc (TSLA)
If you haven’t been watching, TSLA stock has been on a tear during the past month. The shares have soared more than 62% since bottoming in mid-February, with Thursday and Friday’s action taking Tesla stock above both its 200-day moving average and resistance at $220.
The rally surely has short sellers nervous. Currently, more than 34 million shares of TSLA stock are sold short, accounting for 33.45% of the stock’s total float. Still, it doesn’t look like too many short sellers are buying call options to hedge their bets, which could be a problem as TSLA continues its run higher.
On Friday, option volume rose to more than 343,000 contracts on TSLA, with calls only eeking out 58% of the day’s take. In the weekly March 24 series, traders are focused on the in-the-money $235 strike, where 4,304 contracts are currently open. Puts, meanwhile, have accumulated at the $230, $225, and $220 strikes, with more than 1,200 contracts open at each.
Should TSLA continue to gain this week, look for shorts to get squeezed should the stock push past $240 and gain a foothold.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
