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Monday’s Vital Data: General Electric Company, Apple and Tesla

Joseph Hargett

U.S. stock futures are trading flat to lower this morning. Wall Street’s enthusiasm for corporate earnings is once again being hampered by geopolitical issues.

stock market today

Specifically, President Donald Trump fired back at Iranian President Hassan Rouhani in an all-caps tweet on Sunday. Trump’s volatile tweet follows a warning from Rouhani to not pursue hostile policy toward Iran.

Against this backdrop, futures on the Dow Jones Industrial Average are down 0.02% and S&P 500 futures have risen 0.01%. Meanwhile, Nasdaq-100 futures have plunged 0.26% under pressure from a report on Tesla (NASDAQ:TSLA).

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In options activity, volume spiked to well above average due to July options expiration on Friday. Overall, about 20.9 million calls and 17.2 million puts changed hands on the session. Over on the CBOE, the single-session equity put/call volume ratio rose to 0.66, driving the 10-day moving average higher to 0.62.

Earnings once again topped the list for options traders on Friday. General Electric (NYSE:GE) put options soared after the company’s CEO negated strong earnings. Meanwhile, Apple (NASDAQ:AAPL) call options continue to climb ahead of next week’s earnings. Finally, Tesla is in the hot seat following a weekend report on suppliers.

Let’s take a closer look:

Monday’s Vital Options Data: General Electric Company, Apple and Tesla

General Electric (GE)

On Friday morning, General Electric investors were initially told exactly what they needed to hear following earnings. But that was before the investor conference call with CEO John Flannery. During the call, Flannery noted that, “It’s going to be a multiyear fix, with some volatility.” More volatility was not what GE investors were hoping for, and GE stock plunged as a result.

GE call options were quite popular on Friday, despite the stock’s nosedive. Volume rose to 552,000 contracts, with calls claiming 64% of the day’s take. With July expiration on Friday, many of these calls were likely the result of closeouts of expiring position to salvage some gains.

Looking ahead to August, GE options traders are quite bearish. Specifically, the August put/call open interest ratio comes in at 1.10, with puts easily outnumbering calls. Bearish sentiment could continue to rise on GE, as the company has about spent all its good will with investors during this year’s restructuring pains.

Apple (AAPL)

We are just about a week away from Apple’s quarterly earnings report, and AAPL options traders are shifting into high gear. Volume rose on Friday to over 331,000 contracts, with calls claiming an above average 63% of the day’s take.

Despite the added call attention, the weekly Aug 3 put/call OI ratio still rests at a bearish reading of 1.01. In other words, puts are currently more popular than calls on Apple heading into next week’s earnings report.

Weekly Aug 3 implied volatility, meanwhile, is pricing in a modest post-earnings of above 4% for AAPL stock. This puts the upper bound at about $199 and the lower bound near $185.

Tesla (TSLA)

How much drama can Tesla investors handle? That seems to be the company’s new “MO.” From calling a rescue diver a “pedo,” to a copyright row over the image of a farting unicorn, Tesla CEO Elon Musk has run the gamut of potentially offensive and questionable actions in the past month.

Over the weekend, Tesla took that outrage one step further. According to a report, Tesla asked some suppliers for refunds so that it could turn a profit. Tesla did not comment on the report, but has said it is seeking better deals with suppliers.

Puts and calls were in parity on TSLA stock on Friday, with total volume rising to 237,000 contracts. Despite the turmoil surrounding TSLA, the weekly Aug 3 put/call OI ratio rests at a moderate reading of 0.79 heading into next week’s earnings report.

Given the note from this weekend, however, I would expect this ratio to trend sharply higher as puts begin to pile up on the car maker.

As of this writing, Joseph Hargett was long on GE stock.

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