U.S. stock futures are headed higher once again this morning, as Wall Street preps for another run at all-time-high levels on the major market indices. Economic data remains the big driver on the Street after last week’s jobs data.
Today, traders will be greeted with the July NFIB small-business index, second quarter productivity and unit-labor costs and June wholesale inventories.
Heading into the open, futures on the Dow Jones Industrial Average have risen 0.12%, S&P 500 futures have added 0.11% and Nasdaq-100 futures have gained 0.14%.
Options activity fell off sharply on Monday following Friday’s expiration-driven surge. Overall, only about 11.2 million calls and 9.2 million puts changing hands on Monday, arriving just below the three-week average. Over on the CBOE, call options lost some of their luster, as the single-session equity put/call volume ratio rose to 0.58. That said, the 10-day moving average fell to a one-week low of 0.64.
Driving yesterday’s equity options activity, Bank of America Corp (NYSE:BAC) received bullish commentary from Deutsche Bank, Citigroup and Robert W. Baird. Meanwhile, both Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and Alibaba Group Holding Ltd (NYSE:BABA) saw option volume rise sharply ahead of their respective quarterly earnings reports.
Bank of America Corp (BAC)
Friday’s better-than-expected July jobs report provided a considerable tailwind for banking stocks, but Bank of America appears to be the favorite among Wall Street analysts. In fact, Robert W. Baird reiterated BAC stock at “outperform,” while analysts at Citigroup and Deutsche Bank both touted Bank of America’s sensitivity to interest rates and their preference for BAC stock over JPMorgan Chase & Co (NYSE:JPM).
BAC stock’s popularity with call options traders has spiked in the past two sessions, after the shares pushed past their 200-day moving average and technical resistance at $15. On Monday, that bullish bias shown through, as calls snapped up 61% of the more than 407,000 contracts traded on BAC.
That said, the stock will need to put more distance between it and the $15 strike before monthly August options expire on August 19, as there are more than 117,000 call contracts open at this strike in the series, making BAC vulnerable to a dip back below this region.
Valeant Pharmaceuticals Intl Inc (VRX)
Options activity was mixed on Valeant heading into this morning’s quarterly report. Some 255,000 contracts traded on VRX stock, with puts gaining the upper hand with 52% of the day’s take. Options traders were focused heavily on the $20 and $21.50 weekly August 12 series puts, with more than 11,000 contracts open at each strike. Peak call OI for the series, meanwhile, totaled about 8,000 contracts at the $24 strike.
Call options proved to be smart money, however, as VRX stock is up more than 6% premarket following quarterly results. Valeant said it earned $1.40 per share on revenue of $2.42 billion, versus expectations for $1.48 per share on $2.46 billion in revenue. However, Valeant maintained its full-year guidance and announced a push for reorganization to become a more conventional pharmaceutical firm.
Alibaba Group Holding Ltd (BABA)
Chinese internet portal and search giant Alibaba is slated to step into the earnings confessional after the close of trading this Thursday, driving heavy speculation in the options pits ahead of the event. For the record, BABA is expected to earn 62 cents per share on revenue of $4.61 billion, but EarningsWhisper.com indicates that expectations may be a bit higher, with the whisper number arriving at 65 cents per share.
Judging by Monday’s options activity, it appears that bullish traders are on the march for BABA. Total volume came in at just over 204,000 contracts, with calls making up 71% of the day’s take — well above BABA’s daily average call volume.
Despite the apparent bullishness, BABA stock is trading north of peak weekly August 12 series call OI, which totals nearly 4,000 contracts at the in-the-money $85 strike. In fact, BABA is trading above all major call OI in the weekly August series, save the $87 strike, where some 2,250 contracts are currently open.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
