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Friday’s Vital Data: Cisco, Amazon and Boeing

Tyler Craig

U.S. stock futures are trading sharply lower this morning, snapping the market’s three-day winning streak.

Heading into the open, futures on the Dow Jones Industrial Average are down 0.78%, and S&P 500 futures are lower by 0.77%. Nasdaq-100 futures have lost 1.06%.

With bulls running the tables yesterday it should come as no surprise that calls proved more popular than puts. Overall volume climbed to above average levels on the session with 19.8 million calls and 18.9 million puts changing hands.

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The uptick in call activity was enough to pull the CBOE single-session equity put/call volume ratio down from its lofty panic-induced levels. It fell to 0.66, which is a one-week low. Meanwhile, the 10-day moving average held firm at its highest reading of the year at 0.69.

Options activity was a mixed bag on Wednesday (Options traders zeroed in on analyst actions yesterday). Cisco (NASDAQ:CSCO) jumped following a robust earnings report and solid forward guidance. Amazon (NASDAQ:AMZN) benefited from Warren Buffet revealing the size of his stake. Finally, Boeing (NYSE:BA) scored its third up day in a row.

Let’s take a closer look:

Friday's Vital Data: Cisco, Amazon and Boeing options trading

Cisco Systems (CSCO)

Cisco Systems surged 6.66% on the back of strong earnings. For its fiscal third quarter, the technology conglomerate raked in earnings-per-share of 78 cents on revenue of $12.96 billion. Both metrics topped analyst estimates of 77 cents and $12.89 billion, respectively.

Its revenue forecast for the next quarter was also robust, adding to the excitement surrounding the event. Cisco expects 4.5% to 6.5% revenue growth, handily beating analyst calls for 3.5% growth.

The sharp rally carried CSCO stock back above its 20-day and 50-day moving averages, effectively healing all the damage inflicted during the recent market temper tantrum in a single session. It now sits within striking distance of its 52-week high of $57.53. With solid sales growth at its back, CSCO shares should be viewed as a buy into any weakness this quarter.

On the options trading front, earnings enthusiasm spurred call demand. Activity lifted to 305% of the average daily volume, with 193,495 total contracts traded; 68% of the trading came from call options alone.

With the uncertainty of earnings now in the rearview mirror, sellers slammed implied volatility down to 27% or the 22nd percentile of its one-year range. Premiums are now pricing in daily moves of 77 cents or 1.4%.

Amazon (AMZN)

Warren Buffet surprised the Street recently when he revealed his flagship Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) was buying shares of Amazon. On Wednesday, in a filing with the Securities and Exchange Commission, he finally revealed the size of the purchase: 483,300 shares.

Based on Thursday’s closing price that pegs the value of his investment at $921.9 million.

AMZN stock scored its third up day, rising 2% amid a comeback in the tech sector. This week’s successful defense of the rising 50-day moving average confirmed that dip buyers are still alive and well. With the bounce, $1,815 has established itself as the crucial support zone to watch. As long as we remain above it, the path of least resistance is higher.

As far as options trading goes, calls outpaced puts by a slim margin accounting for 56% of the total. Activity ticked higher to 130% of the average daily volume, with 245,923 total contracts traded.

Implied volatility sunk to 25% placing it at the 25th percentile of its one-year range. The expected daily move is now $28.23 or 1.5%.

Boeing (BA)

Boeing shares finally achieved liftoff, but with overhead resistance looming large it’s bound to be a short flight. Yesterday’s 2.4% climb marked its third up day in a row and recovered some of the ground lost during last week’s nasty breakdown.

The $362 area was a significant support level on the way down, and I fully expect it to prove stiff resistance moving forward. This run-up smells like a dead-cat bounce.

Nonetheless, yesterday’s jump was enough to create a surge in options trading. Speculators favored calls almost 2 to 1 over puts. Total activity grew to 109% of the average daily volume, with 118,273 contracts traded.

Meanwhile, on the implied volatility front, the reading fell to 27% which lands it at the 26th percentile of its one-year range. Premiums are now pricing in daily moves of $6.12 or 1.7%.

As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

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