U.S. stock futures are inching cautiously higher this morning, as Wall Street digests the release of August’s nonfarm payroll report.
Economists were expecting around 180,000 jobs added over the past month, with any deviations acting as signs for the next potential interest rate hike from the Federal Reserve. Instead, the economy added just 151,000 jobs, falling sharply from figures earlier in the summer.
A stronger-than-expected August jobs figure would have all but locked in a sooner-than-expected rate hike.
Ahead of the August jobs report, futures on the Dow Jones Industrial Average were up 0.10%, the S&P 500 Index added 0.06% and Nasdaq 100 futures are higher by 0.17%.
Thursday’s options activity was brisk, with exchange-traded funds rising to the forefront as traders sought portfolio protection ahead of today’s jobs data and the long Labor Day holiday weekend. Overall, 15.6 million calls and 12.9 million puts changed hands yesterday. Over on the CBOE, the single-session equity put/call volume ratio rose to 0.70, while the 10-day moving average hit a one-month high of 0.66.
Providing fuel for Thursday’s options activity, Tesla Motors Inc (NASDAQ:TSLA) traders were not happy with emerging details on SolarCity Corp’s (NASDAQ:SCTY) liquidity issues, while Procter & Gamble Co (NYSE:PG) saw arbitrage speculation ahead of the spin off of its “P&G Specialty Beauty Brands” unit. Finally, salesforce.com, inc. (NYSE:CRM) beat second-quarter earnings expectations, but third-quarter guidance left investors wanting.
Tesla Motors Co (TSLA)
TSLA stock dove more than 5% on Thursday, after details emerged that SolarCity may be in more financial trouble than CEO Elon Musk let on. Analysts at Oppenheimer summed up the situation, believing that “SCTY needs the acquisition to close as soon as possible” due to liquidity concerns that have been in place since the second half of 2015.
Additionally, Tesla noted that it needs to raise more funds by the end of this year for its own operations, adding to the woes created by the SolarCity acquisition. Options traders expressed their concern by piling into TSLA stock puts on Thursday. Total volume came in at 434,000 contracts, with puts snapping up 58% of the day’s take.
TSLA stock is now threatening support in the $200 region, and options traders have responded by pushing open interest at the September series $200 strike to more than 12,000 contracts. What’s more, that attention has shifted even lower in the October series, where 3,600 puts are open at the $160 strike.
Procter & Gamble Co (PG)
Despite being a major blue-chip firm, P&G rarely cracks the top ten most active options listing. When it does, PG stock is usually the target of dividend capture strategies or arbitrage deals. Thursday was no different, as options traders sought to take advantage of the coming sale of P&G’s global fine fragrances, salon professional, cosmetics and retail hair color businesses — referred to as “P&G Specialty Beauty Brands.” — to Coty Inc (NASDAQ:COTY).
PG stock options volume rose to a near-term high of 882,000 contracts, with puts and calls neatly divided down the middle in Thursday’s action. In the monthly September series, the in-the-money $87.50 strike saw the most action, with OI rising to nearly 24,000 contracts.
However, the weekly Oct. 14 series saw the most notable activity, with more than 90,000 contracts now open at the both the $120 put and call strikes.
salesforce.com, inc. (CRM)
Initially, salesforce.com’s second-quarter earnings report started off on the right foot. The company said it earned earned 24 cents per share on $2.04 billion in sales, topping expectations for earnings of 22 cents per share and revenue of $2 billion.
However, guidance kicked off a selling spree, with salesforce.com placing third-quarter guidance at 20 and 21 cents per share on revenue ranging from $2.11 to $2.12 billion. The consensus is looking for a profit of 24 cents and $2.12 billion in sales.
As a result, options traders sought out CRM puts on Thursday. Total volume rose to nearly 250,000 contracts, with puts snapping up 54% of the day’s take. CRM is now trading just below $76, breaching its 200-day moving average in yesterday’s plunge.
There is still some support below CRM, however, as technical price support exists at $75, as well as a wealth of put options in the September/October monthly series, that could help keep the shares afloat until they can reclaim the 200-day trendline.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
