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Friday’s Vital Data: McDonald’s, Twitter and Merck

U.S. stock futures are trading lower this morning as investors prepare for the G-20 meeting between President Trump and Chinese leader Xi Jinping. A successful outcome could ease trade war concerns that have hounded asset prices for months.

Friday's Vital Data: McDonald's, Twitter and Merck

Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.32% and S&P 500 futures are lower by 0.21%. Nasdaq-100 futures have shed 0.03%.

In the options pits, call volume once again drove the bus as optimism dampened put demand. Specifically, about 18.5 million calls and 14.9 million puts changed hands on the session.

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Over at the CBOE, the single-session equity put/call volume ratio cratered to 0.57 — a one-month low. The 10-day moving average fell back to 0.71.

Options activity was a mixed bag on Wednesday (Options traders zeroed in on analyst actions yesterday). McDonald’s (NYSE:MCD) benefited from an upgrade by Morgan Stanley (NYSE:MS). Meanwhile, Twitter (NASDAQ:TWTR) and Merck (NYSE:MRK) were scored technical-driven moves by active traders.

Let’s take a closer look:

McDonald’s (MCD)

McDonald’s surged to a new record high at the open yesterday as buyers swarmed in response to an upgrade by Morgan Stanley. Analyst John Glass lifted their rating from “equal weight” to “overweight” and modified MCD stock’s price target to $210.

In an upbeat note to investors, Mr. Glass applauded the company’s modernization efforts and said that Morgan Stanley is “buying the McDonald’s of the future today.”

Upgrade aside, MCD stock has been on an absolute tear this fall. Its strength has made the ubiquitous fast-food chain a beacon for buyers tiring of the bloodletting elsewhere. The recent muscle-flexing was boosted by a rosy October earnings release which dazzled investors.

On the options trading front, traders came after calls with a vengeance. Activity ballooned to 591% of the average daily volume, with 108,068 total contracts traded. 89% of the trading came from call options alone. While some of the buying was undoubtedly in response to the upgrade, the lion’s share was likely due to traders looking to accumulate shares ahead of Friday’s $1.16 dividend payout.

Implied volatility rallied higher on the day to 20% placing it at the 38th percentile of its one-year range. Traders are pricing in daily moves of 1.3%


Twitter (TWTR)

Sometimes news drives trading volumes, and other times it’s simply a matter of traders trading. Twitter’s appearance atop the most actives list was a byproduct of the latter because there was zero news of note yesterday.  The most likely culprit may be fears that conservatives could be leaving the platform.

In early morning trading, TWTR stock cratered as much as 8.53% amid heavy volume, but the loss was pared to 4.33% by day’s end. The technical posture of Twitter shares suggests the stock sits in no man’s land, so a break of support at $30 or resistance at $36 is needed before directional trades are attractive.

On the options trading front, calls outpaced puts by a wide margin despite the price decline. Activity climbed to 392% of the average daily volume, with 263,292 total contracts traded. Calls accounted for 78% of the total.

Implied volatility lifted modestly on the day to 52% placing it at the 37th percentile of its one-year range. Traders are pricing-in daily moves of 3.3%.

Merck (MRK)

Healthcare stocks are earning their keep as defensive plays, and Merck is a perfect example why. Yesterday the pharmaceutical giant tagged a new 17-year high at $78.48. All told, its year-to-date gains now total 21.6% and stand in stark contrast to the growing number of sectors that are in losing territory.

Like TWTR, news for Merck was light so consider its popularity a random byproduct of traders chasing the recent price breakout.

On the options trading front, calls ruled the roost. Activity increased to 310% of the average daily volume, with 85,644 total contracts traded. 78% of the trading came from call options alone.

The increased demand drove implied volatility higher on the day to 20% placing it at the 33rd percentile of its one-year range. Traders are pricing-in 1.3% daily moves.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.

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