U.S. stock futures are trading just below breakeven this morning, as Wall Street puts aside Brexit concerns and weighs its options ahead of today’s June nonfarms payroll report. After May’s jobs data came in well below expectations, all eyes will be on this morning’s release, with economists expecting 170,000 jobs added and the unemployment rate to rise to 4.8% from 4.7%.
At last check, futures on the Dow Jones Industrial Average had slipped 0.07%, while S&P 500 futures were off 0.11% and Nasdaq-100 futures were down 0.08%.
Options activity is beginning to lean toward protection once again, with puts gaining traction on the Chicago Board Options Exchange. Overall, however, the situation looks normal, with 13.6 million calls and 11.6 million puts crossing the tape on Wednesday. As for CBOE data, the single-session equity put/call volume ratio rose to another one-week high of 0.76, while the 10-day moving average inched higher to 0.71.
In equity option news, Amazon.com, Inc. (NASDAQ:AMZN) call volume popped after SunTrust boosted its price target. Meanwhile, Netflix, Inc. (NASDAQ:NFLX) reversed course following bearish action from Jefferies and Valeant Pharmaceuticals Intl Inc (NYSE:VRX) soared when Rodman & Renshaw offered up one of the most bullish price targets for VRX in quite some time.
Amazon.com, Inc. (AMZN)
Call volume spiked on AMZN on Wednesday after SunTrust lifted its price target on Amazon stock to $775 from $710. Despite the boost, SunTrust remained “neutral” on AMZN’s prospects, citing increased competition and pressures on revenue and margins. According to Thomson/First Call, the consensus 12-month price target for AMZN rests at $804.55.
Options traders were bullish following the price-target increase, with calls accounting for 62% of the more than 212,000 contracts trading on AMZN yesterday. That said, AMZN’s short-term outlook isn’t quite as rosy, with the total July put/call open interest ratio arriving at 0.90 — with puts in near parity with calls among all options set to expire in July. Traders should keep a close eye on technical support at $700 and resistance near $740 and $750.
Netflix, Inc. (NFLX)
Netflix stock just suffered back-to-back downgrades, with Jefferies cutting the shares one day after Needham’s bearish report. Citing the recent Comcast Corporation (NASDAQ:CMCSA) streaming news, Jefferies said that the deal wouldn’t provide as big a boost to Netflix subscriber numbers and many were anticipating. As a result, Jefferies cut NFLX stock from “hold” to “underperform” and lowered its price target to $80 from $120.
NFLX options traders appeared to shrug off the news, as calls made up 61% of yesterday’s nearly 300,000 contracts in total volume.
However, given NFLX’s propensity to attract short sellers, these calls may have been hedges for newly place short positions — though we’ll have to wait for the next short reporting period for confirmation. Currently, 36.4 million shares or 8.6% of NFLX’s total float is sold short.
Valeant Pharmaceuticals Intl Inc (VRX)
From one extreme with NFLX to an even greater extreme with VRX, analyst action was quite the market mover on Wednesday. For Valeant, Rodman & Renshaw analyst Raghuram Selvaraju doled out a whopping $90 price target for the struggling pharmaceuticals stock. In a note to clients, Selvaraju said “Multiple regulatory decisions slated for this month. In our view, July is shaping up to be a busy month for Valeant.”
VRX stock soared roughly 14% yesterday, driving a significant skew toward call options on the session. Specifically, these typically bullish bets snapped up 76% of the day’s total volume of more than 295,000 contracts. Recent call activity is taking its toll on VRX’s intermediate-term open interest configuration, as the July-August put/call open interest ratio has fallen from a reading north of 1.10 to its current perch at 0.90.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
