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Friday’s Vital Data: Apple, Electronic Arts and Weatherford International

Joseph Hargett

U.S. stock futures are set to finish the month on a sour note today. The early morning decline comes amid light trading volume as traders break for the Labor Day holiday weekend.

Trade tensions are also dragging stocks lower this morning. According to reports, President Donald Trump intends to push ahead with tariffs on $200 billion in additional Chinese imports. The move could come as soon as next week. Trump is also threatening to withdraw the U.S. from the World Trade Organization.

Despite the turmoil, the major market indices are set to finish August broadly higher. Currently, the Dow Jones Industrial Average has gained 2.3% for the month, the S&P 500 Index has added 3% and the Nasdaq is up 5.4%.

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As for futures ahead of the open, the Dow is off 0.28%.  Additionally, S&P futures have lost 0.23% and Nasdaq-100 futures are lower by 0.15%.

In the options pits, volume was pretty average for a Thursday. About 19.7 million calls and 16.3 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio climbed for a fourth session in a row, hitting a one-week high of 0.58. The 10-day moving average paused it’s recent decent and held at a two-month low of 0.58.

Options traders renewed their love affair with Apple (NASDAQ:AAPL) yesterday. The iPhone maker announced a new event on Sept. 12, while Warren Buffett added more AAPL stock. Meanwhile, Electronic Arts (NYSE:EA) plunged on a lowered forecast and Weatherford International (NYSE:WFT) was flooded with put activity.

Let’s take a closer look:

Friday’s Vital Options Data: Apple, Electronic Arts and Weatherford International

Apple (AAPL)

Options volume on Apple stock surged yesterday to more than double the average following a pair of positive reports. First, Warren Buffett said that Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.Bpicked up “a little bit more” of AAPL stock in an interview with CNBC. Then Apple announced a new event for Sept. 12, which many believe will be the unveiling of new iPhone models.

It was just too much for AAPL options speculators to bear. More than 1.5 million contracts traded on Apple yesterday, and calls claimed 66% of that total.

Speculative activity picked up sharply in the weekly Sep 14 series, which expires right after Apple’s new event. The put/call open interest ratio for September 14 options comes in at 0.74, down from a reading north of 0.9 just two weeks ago. Look for this ratio to trend even higher as more iPhone leaks hit the market ahead of the event.


Electronic Arts (EA)

Electronic Arts saw a massive surge in options activity yesterday. More than 556,000 contracts traded on EA stock, more than 14 times it’s daily average. Calls were the most popular, grabbing 64% of the day’s take.

The attention to call activity was unusual, given that EA stock plunged nearly 10% following lowered guidance. The company delayed the release of Battlefield V, a first-person shooter video game, until Nov. 20, and updated its expectations to match the delay. Analysts were not happy, calling the move another in a “a series of missteps.”

Yet, the attention to call activity among speculative traders gives the impression that options traders believe EA will bounce back. In fact, EA bulls have heavily targeted the November series, where the put/call OI ratio has fallen to 0.52. In other words, calls are nearly twice as popular as puts in the series, which now expires just ahead of Battlefield V’s new release date.

Weatherford International (WFT)

One trader (or multiple traders, it’s impossible to tell) has been making big bets on WFT this year. In the latest of a string of large put option plays on the oil services firm, a block of 180,000 Sep $3.50 puts traded on the stock yesterday. Total activity at the strike was more than 251,000 contracts, or nearly all of yesterday’s volume.

The activity was similar to what we’ve seen on the shares dating back to May.

This time around, Trade-Alert.com indicates that this block of September $3.50 puts crossed at the mid-price, and implied volatility remained flat. However, OI at the strike plunged by more than 252,000 contracts. This appears to be the closure of a trade initiated on July 29.

At the time, it appeared that the trader had sold to open 218,000 September $3.50 puts in the hopes that WFT would rise above the strike prior to expiration. Here’s hoping the bid/ask prices were in their favor and they actually bought those contracts.

WFT is down more than 26% since July 29. If the trader actually bought these puts back then, they are sitting on a considerable profit right now. If not, then they are taking a heavy loss to avoid being assigned nearly 22 million shares.

As of this writing, Joseph Hargett held no position in any of the aforementioned equities.

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