U.S. stock futures are trading flat to lower this morning ahead of a speech from Federal Reserve Vice Chairman Stanley Fischer. Wall Street will be looking to see if Fischer continues Fed Chair Janet Yellen’s hawkish language on interest rates.
What’s more, the market may be loath to go anywhere this week, ahead of Friday’s August jobs report. As for today’s economic data, August’s consumer confidence report is on the docket.
Heading into the open, futures on the Dow Jones Industrial Average are off 0.04%, S&P 500 have fallen 0.10%, while Nasdaq-100 futures are off 0.24% due to an EU ruling that Apple Inc. (NASDAQ:AAPL) owes €14.5 billion in taxes.
Monday’s options activity plummeted to levels not seen in months, as only about 9.9 million calls and 8.7 million puts traded yesterday. Blame for the light sessions could be laid at the feet of uncertainty ahead of Friday’s jobs data. Over on the CBOE, the single-session equity put/call volume ratio retreated to a one-week low of 0.60, while the 10-day moving average hit a four-week high of 0.64.
Providing fuel for Thursday’s options activity, Bank of America Corp (NYSE:BAC) saw elevated call volume as The Institutional View’s “buy” rating added to growing bullish sentiment surrounding interest-rate expectations. Elsewhere, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) speculation rose after a lawsuit alleged racketeering charges against the company. Finally, Netflix, Inc. (NASDAQ:NFLX) options activity was as mixed as yesterday’s ratings action, where NFLX saw both “buy” and “sell” designations emerge.
Bank of America Corp. (BAC)
BAC stock could be looking to break out to 2016 highs in the wake of Fed Chair Janet Yellen’s hawkish interest-rate commentary last week. The shares received a boost late on Monday, as well, as The Institutional View called BAC stock a “trading buy” following recent insider buying activity.
Specifically, Bank of America Director Thomas Woods bought 25,000 shares three weeks ago, while President of Retail Banking Thong Nguyen bought 30,000 shares in February, alongside Director Frank Bramble’s purchase of 75,000 shares.
As for options activity, BAC saw nearly 897,000 contracts change hands on Monday, with calls snapping up 74% of the day’s take. Recent attention to call options has pushed BAC’s September/October put/call open interest ratio steadily lower to a perch at 0.93 from a reading north of 1 just three weeks ago.
Additionally, BAC stock is trading north of peak September call OI, which numbers 207,000 contracts at the $15 strike, compared to about 81,000 contracts at $16 in the series.
Valeant Pharmaceuticals Intl Inc (VRX)
Valeant still can’t seem to shake off the mantle of bearish sentiment lately. The beleaguered pharmaceutical firm was targeted by a lawsuit in New York Federal Court yesterday, alleging Racketeer Influenced and Corrupt Organizations (RICO) Act violations on drug pricing. The lawsuit seeks compensatory and triple damages.
VRX stock fell nearly 1.9% on the news, as call traders shrank from the shares. Overall, 189,000 contracts traded on VRX, with calls managing to eke out 55% of the day’s take. VRX broke out above former resistance at $30 last week, and yesterday’s news is dragging the shares back toward this key support/resistance level.
There are more than 9,200 open call contracts at $30 in the September series that could be at risk should VRX breach support. By comparison, about 7,000 put contracts are also open at the $30 strike in the September series.
Netflix, Inc. (NFLX)
When it comes to sentiment, there is very little middle ground on Netflix — either you love the stock, or you hate it. This sentiment accurately played out yesterday, when RBC Capital Markets reiterated NFLX at “outperform” with a $130 price target, while Axiom Capital Management initiated coverage with a “sell” rating and an $80 price target. From current levels, that’s either 33% upside or 21% downside, based on stated targets.
NFLX has struggled since April, declining steadily to break psychological support near $100, adding fuel to the bearish fire on the shares. That said, calls appeared to gain an upper hand on Monday.
Overall, nearly 193,000 contracts traded on NFLX, with calls accounting for 55% of the day’s take. Looking at the front-two months of options, traders remain divided, as NFLX’s September/October put/call open interest ratio rests at 0.99, with calls and puts in near parity.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
