Monday’s Vital Data: Alibaba, Amazon and U.S. Steel
U.S. stock futures are trying to find their footing after a nasty open Sunday night. The weekend plunge came in response to President Trump threatening to hike tariffs on imported goods from China. Jittery investors are now questioning whether a trade deal is truly close.
Against this backdrop, futures on the Dow Jones Industrial Average are down 1.78%, and S&P 500 futures are lower by 1.54%. Nasdaq-100 futures have shed 1.88%.
In the options pits, call volume spiked sharply Friday alongside the robust market rally. Overall volume levels ended above average levels. Specifically, about 21.1 million calls and 15.9 million puts changed hands on the session.
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The euphoria made waves at the CBOE, where the single-session equity put/call volume ratio plunged to 0.52, marking a new one-month low. Meanwhile, the 10-day moving average slipped to 0.60, but it remains in the middle of its three-month range.
Options activity was unusually hot in these three names: United States Steel (NYSE:X), Amazon (NASDAQ:AMZN) and Alibaba (NYSE:BABA)
Let’s take a closer look:
United States Steel Corporation (X)
The few remaining bulls in United States Steel staged an impressive counterattack on Friday, sending the stock 17% higher amid massive volume. The timing wasn’t random. It came in response to an earnings announcement that topped expectations.
For the quarter, U.S. Steel earned 47 cents on sales of $3.5 billion. The Street was forecasting 22 cents per share on $3.25 billion of revenue.
Despite the sharp rebound, X stock remains in a downtrend with overhead resistance aplenty. Until it can reverse the longer-term slide by rising above the 50-day moving average and carving out a series of higher highs and lows, I suggest caution.
On the options trading front, call options were all the rage. Activity grew to 411% of the average daily volume, with 240,506 total contracts traded; 65% of the trading came from call options alone.
Implied volatility fell on the day to 52% placing it at the 43rd percentile of its one-year range. Premiums are baking in daily moves of 55 cents or 3.3%.
Amazon (AMZN)
Amazon scored a rare up gap Friday after Warren Buffett announced that his company, Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) had purchased a stake in the e-commerce juggernaut. The money quote from the CNBC interview where he revealed the investment was when Buffett deemed himself “an idiot for not buying” shares in Amazon before.
The jump and subsequent followthrough sent AMZN stock to a new seven-month high at $1,962.46. It now sits a stone’s throw from record highs at $2,050.50.
On the options trading front, calls won the popularity contest by a wide margin. Total activity jumped to 225% of the average daily volume, with 361,820 total contracts traded. Calls claimed 62% of the day’s take.
Implied volatility remains at a lowly 22%, which also places it at the 22nd percentile of its one-year range. Cheap premiums are pricing in daily moves of $27.75 or 1.4%.
Alibaba (BABA)
Breakout chasers swarmed Alibaba on Friday, sending the Chinese internet giant up 2.8% on above-average volume. The resistance breach lifted BABA stock to a new nine-month high and brought its year-to-date gains to a solid 42%.
Its price trend has toed the bullish line with rising 20-day and 50-day moving averages. The series of higher highs and lows continued, uninterrupted all year long. Unfortunately, Trump’s weekend tweets are sending Chinese stocks into a tailspin and BABA is set to open down 5%, effectively upending last week’s breakout.
On the options trading front, calls were the hot ticket helping to drive total activity up to 179% of the average daily volume, with 248,624 contracts traded. Calls accounted for 68% of the sum.
The increased demand pushed implied volatility higher on the day to 35%, placing it at the 27th percentile of its one-year range. Premiums are now pricing in daily moves of $4.27 or 2.2%.
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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