U.S. stock futures are headed lower this morning, as Wall Street prepares for the end of both March and the first quarter. The Dow Jones Industrial Average is on pace for a roughly 5% gain for the quarter — its sixth consecutive positive quarter. Meanwhile, the Nasdaq Composite is up nearly 10% on the quarter, with the S&P 500 Index adding about 5.8%.
However, this morning isn’t’ looking anywhere near as bright, with Dow futures off 0.06%, S&P 500 futures down 0.12% and Nasdaq-100 futures lower by 0.04%.
On the options front, things remained rather tame on Thursday, with about 13.7 million calls and 11.2 million puts crossing the tape. On the CBOE, the single-session equity put/call volume ratio bounced back from Wednesday’s one-month low to finish at 0.58. The 10-day moving average, meanwhile, held at 0.64.
Driving Thursday’s options volume, Bank of America Corp (NYSE:BAC) is making a comeback as Trump trade fears wane and Merrill goes through restructuring. Elsewhere, Lululemon Athletica Inc. (NASDAQ:LULU) was hammered following a poor fourth-quarter earnings showing, and Freeport-McMoRan Inc (NYSE:FCX) is back in the bulls crosshairs after ending a strike at its Peruvian mine and nearing an export deal with Indonesia.
Bank of America Corp. (BAC)
Is the Trump trade in the banking sector back on? BAC stock traders seem to think so.
The shares rebounded more than 2% yesterday, with sentiment bolstered by positive restructuring at Merrill Lynch designed to streamline the unit’s integration with BofA. Traders are hopeful that, despite the failure to repeal Obamacare, Donald Trump’s agenda of lower taxes, less Wall Street regulation and economic stimulus remain achievable goals.
On that front, BAC stock options traders piled into the shares on Thursday, sending more than 1.02 million contracts across the tape. Calls made up roughly 75% of the day’s take. Looking at data from Trade-Alert.com, we find that Thursday’s biggest block trade was centered on the April $26 call, with a block of 28,700 contracts trading at the ask price of 3 cents, or $3 per contract. However, BAC stock would need to rally more than 9% for the April $26 call to trade in the money — that’s quite a bullish bet.
Lululemon Athletica Inc. (LULU)
LULU stock was obliterated yesterday, with the shares plunging more than 23% after Lululemon offered up poor earnings and weak guidance. By the numbers, Lululemon said it earned $1 per share on revenue of $789.9 million, compared with expectations for earnings of $1.01 per share and sales of $785.1 million. Guidance was the real killer, however, with LULU looking at a full-year earnings of $2.31 per share, versus analyst estimates of $2.56.
Despite the pummeling, LULU options traders were still call heavy on the day. Volume surged to a near-term high of 459,000 contracts, with calls snapping up 55% of the day’s take. LULU stock is now trading well below all major put and call accumulations for the short-term, though open interest at the April $50 strike is gaining traction. If the shares manage to hold their ground here, an April $50 put sell may be play worth looking into.
Freeport-McMoRan Inc. (FCX)
FCX clawed its way to a 4.6% gain on Thursday following news that a strike at its Cerro Verde mine in Peru is coming to an end as of today. Additionally, Freeport appears to be on the verge of inking an export deal with Indonesia that would allow the company to resume exports for the next six months at its Grasberg mine — the world’s second-biggest copper mine.
Options traders were clamoring to get in ahead of a potential Indonesia deal. Volume rose to 236,000 contracts, with calls gobbling up 78% of the day’s take. Looking at April options, FCX is still trading well shy of peak call OI for the series, which totals 44,000 contracts at the $14 strike.
What’s more, there’s another 13,000 contracts open at the April $15 call strike. If Freeport can finally end its feud with Indonesia, we could see the shares test one, if not both of these levels — assuming copper prices don’t tank in the meantime.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
