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Monday’s Vital Data: Apple, Micron and Transocean

Joseph Hargett

U.S. stock futures are trading broadly lower this morning. Fresh tariffs in the U.S./China trade war hit today, and Wall Street is eyeing this week’s Federal Open Market Committee (FOMC) meeting.

The U.S. enacted 10% tariffs on $200 billion in Chinese imports this morning. China has retaliated with $60 billion in tariffs on U.S. imports. Wall Street has largely ignored the dispute, but the tariffs are creeping into corporate America. Most notably, Micron (NASDAQ:MU) blamed tariffs for its weak guidance.

Also, the FOMC meets this week. The Federal Reserve is widely expected to hike interest rates again on Wednesday. Fed Chair Jerome Powell’s comments at the post-meeting press conference will be closely scrutinized.

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Against this backdrop, futures on the Dow Jones Industrial Average are down 0.1%, with S&P 500 futures falling 0.18%. Nasdaq-100 futures are down 0.44%.

In the options pits, volume was brisk on Friday. Overall, about 23.7 million calls and 18.9 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio rose to 0.57. However, the 10-day moving average dipped to 0.58, a four-week low.

Options traders remained focused on tech on Friday, but put volume is beginning to rival call activity on market leaders. Apple (NASDAQ:AAPL) options were divided as new iPhone hit store shelves, and Micron saw mixed activity following poor earnings guidance. Transocean (NYSE:RIG) was also put heavy following an analyst upgrade and a submersible contract.

Let’s take a closer look:

Monday’s Vital Options Data: Apple, Micron Technology and Transocean

Apple (AAPL)

The newly announced iPhone models hit store shelves last week. Such events have been followed by long lines at Apple Stores and other retailers. However, report indicate that lines are noticeably shorter this time around.

According to BTIG analyst Walt Piecyk, “The flagship 5th Ave store line reached 3/4 of the way to Madison Ave, while last year the 8/8+ line reached Madison and the iPhone X wrapped around the block. The iPhone 6/6+, the only supercycle product, generated a line that wrapped all the way around the block and back to the front of the store and then extended up 5th Avenue.”

AAPL stock options traders were also noticeably less engaged that usual following an iPhone release. Volume rose to 660,000 contracts, or inline with Apple’s daily average. Calls were nearly split with puts on the day, claiming only 51% of the day’s take.

Furthermore, recent put activity has pushed the October put/call open interest ratio to a near-term high for AAPL stock. This reading comes in at a lofty perch of 1.30, with puts firmly in command of the sentiment outlook. Peak put OI currently rests at the October $210 strike, with another heavy accumulation at $200.


Micron (MU)

Last week, Micron said fourth-quarter earnings rose 75% and revenue jumped 35% — both impressive gains. However, guidance came up light, leading to concerns about cyclical DRAM and NAND flash memory demand. Micron blamed President Donald Trump’s $200 billion in Chinese tariffs for the weak guidance — one of the few companies to directly call out the president’s trade war policies.

Options traders appeared to remain positive, however. Volume on Friday rose to 656,000 contracts, or more than twice MU’s daily average. Calls made up about 64% of the day’s take, which is below average compared to the two weeks prior to earnings.

Micron’s outlook for October options remains bullish, despite trade and DRAM/NAND concerns. Currently, the October put/call OI ratio comes in at 0.57. This is down from last Monday’s reading of 0.58, as options traders continue to favor calls over puts.

MU stock is off it’s Friday lows near $40, but the shares are still showing weakness in the face of rising China/U.S. trade tensions.

Transocean (RIG)

RIG stock is up nearly 25% since hitting a low of about $10.85 on Sept. 6. The stock is rallying on news of increased demand for underwater rigs. In fact, the company just announced a six-well contract for its new harsh environment semisubmersible Transocean Norge.

Tight supply in the underwater drilling sector led Wells Fargo analyst Judson Bailey to upgrade RIG to “outperform” from “market perform” last week. Bailey also lifted his price target to $16 from $13.

The news sparked a gusher of options activity on Friday for RIG stock. Volume soared to 289,000 contracts, or more than 10 times RIG’s daily average. That said, puts were the main course, claiming 67% of the day’s take.

According to Trade-Alert.com data, three blocks of about 50,000 contracts in the January 2019 series made up the bulk of Friday’s activity. Two of these blocks appeared to have been sold at the January 2019 $12 put strike, with the other block purchased at the $11 put strike.

As of this writing, Joseph Hargett was long MU stock.

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