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Monday’s Vital Data: Baidu, Tesla and Roku

Tyler Craig

U.S. stock futures are trading lower this morning.

Heading into the open, futures on the Dow Jones Industrial Average are down 0.66%, and S&P 500 futures are lower by 0.79%. Nasdaq-100 futures have shed 1.58%.

In the options pits, pre-weekend jitters were enough to power put volume to well above average levels. Specifically, about 20 million calls and 21.5 million puts changed hands on the session.

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The mad dash for puts was on full display at CBOE, where the single-session equity put/call volume ratio rocketed to a new 2019 high at 0.81. The 10-day moving average followed suit, ramping to a new record for the year at 0.72.

Options traders zeroed in on these three companies. Baidu (NASDAQ:BIDU) shares were in freefall after reporting its first quarterly loss as a public company. Tesla (NASDAQ:TSLA) fell to a fresh two-year low after a leaked company email revealed a worrisome cash burn rate. Finally, Roku (NASDAQ:ROKU) calls surged alongside the stock jumping to a new record intraday high.

Let’s take a closer look:

Monday's Vital Data: Baidu, Tesla and Roku options trading

Baidu (BIDU)

Without fail, every earnings season includes a few bad apples. These unlucky few not only miss expectations but do so in such an epically bad fashion that their stock prices suffer an instant double-digit drawdown. Baidu became such an example with a 16.5% plunge on Friday.

For the quarter, the king of internet search in China lost money for the first time since going public in 2005. A 53% jump in operating expenses coupled with a huge slowdown in online marketing revenues, which only grew 3%, were the top causes for the disappointing numbers.

With Friday’s whack, Baidu’s stock price now sits at a six-year low and is down 55% from its all-time highs. Its price trend is pointing lower across all time frames.

On the options trading front, puts slightly outpaced calls on the session. Activity grew to 503% of the average daily volume, with 222,895 total contracts traded. Puts accounted for 53% of the sum.

Given the enormous gap, volatility buyers came out as massive winners. Implied volatility wasn’t all that high ahead of the event and actually rallied afterward to 36%, which places it at the 37th percentile of its one-year range. Premiums are now pricing in daily moves of $2.89 or 2.3%.


Tesla (TSLA)

A leaked memo sent Tesla shares skidding 8% on Friday (and another 4.3% this morning) amid concerns that the electric car maker is running out of cash. According to Electrek, CEO Elon Musk told employees in an email that the company is implementing aggressive cost-cutting measures to slow how quickly the company is burning through its cash reserves.

Tesla is poised to open Monday at a fresh two-year low. Not that weakness is anything new. TSLA stock has been sliding all year long and now sits 50% off its all-time high. With all major moving averages pointing lower and heaps of resistance overhead, all future rallies must be viewed with skepticism.

On the options trading front, puts surged as traders took to the derivatives market for protection. By day’s end, total activity climbed to 189% of the average daily volume, with 555,397 contracts traded; 62% of the trading came from put options alone.

The increased demand drove implied volatility higher on the day to 64%, placing it at the 35th percentile of its one-year range. Premiums are baking in daily moves of $8.48 or 4%.

Roku (ROKU)

Ever since last month’s rousing earnings release, Roku shares have been flying high. Although the day’s gains were pared by the closing bell, ROKU stock notched a new intraday record high at $87.14. The strength is impressive, given the backdrop of a market that can’t seem to find its footing.

ROKU sits atop a rising 20-day, 50-day and 200-day moving average. Volume patterns have heavily favored buyers for the past two months with nary a whiff of distribution. There are plenty of support levels looming beneath, so consider the stock a buy into any weakness.

On the options trading front, calls reigned supreme on the session. Activity jumped to 148% of the average daily volume, with 105,339 contracts traded. Calls claimed 63% of the total trading.

Implied volatility slid sideways to 54% and now sits at the 21st percentile of its one-year range. Premiums are pricing in daily moves of $2.88 or 3.4%.

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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