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Monday’s Vital Data: Micron, Tesla and Amazon

Joseph Hargett

U.S. stock futures are sharply lower this morning. Trade war rhetoric deepened from President Donald Trump, who promised “more reciprocity by the U.S” if EU trading partners didn’t remove their trade barriers and tariffs.  Additionally, Trump is expected to announce curbs on Chinese investment in U.S. technology firms later this week.

Heading into the open, futures on the Dow Jones Industrial Average are down 0.69%. Meanwhile, S&P 500 futures have fallen 0.5% and Nasdaq-100 futures have plunged 0.82%.

In options activity, volume was rather tame on Friday. About 18.3 million calls and 13.7 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume held at 0.56 for the third straight session. The 10-day moving average, too, remained stagnant at 0.55.

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Options traders have remained call heavy throughout the recent market pullback. Micron Technology (NASDAQ:MU) was most popular among call traders on Friday, after Benchmark initiated coverage with a “buy” rating.

Meanwhile, Tesla (NASDAQ:TSLA) put options saw a resurgence after Bernstein raised margin concerns. Finally, Amazon.com (NASDAQ:AMZN) calls were popular despite last week’s Supreme Court ruling on internet taxes.

Let’s take a closer look:

Monday’s Vital Options Data: Micron, Tesla and Amazon

Micron Technology(MU)

Micron stock started Friday off in rally mode after Benchmark initiated coverage on MU with a “buy” and an $80 price target. The rating firm said it believed Micron has moved from a “cash burn” company to a “cash return” company in just two years. They also expected cyclical growth to generating increasing profits and cash flow.

MU stock options traders cheered the upgrade, even as Micron shares took a nosedive late on Friday. Volume rose to more than 480,000 contracts, with calls snapping up 66% of the day’s take.

Furthermore, Micron’s July put/call open interest ratio has declined steadily since Thursday last week. This reading has dropped from 0.90 to today’s perch at 0.86 as calls are added at a faster rate than puts. In other words, optimism continues to grow on MU stock, despite the shares recent decline amid trade war fears with China.

Tesla (TSLA)

Tesla’s gross margins may be under pressure according to Bernstein. The ratings firm, on Friday, reiterated its “market perform” rating on TSLA stock, citing declining profit margin in its “Services and Other” business segment. According to Bernstein, Tesla’s gross profit margin for its “Services and Other” segment declined to a -45% in the first quarter.

Tesla options traders responded with put options on Friday. Volume rose to 347,000 contracts, or 1.39 times TSLA’s daily average. Puts made up 52% of the day’s take, reversing last Tuesday’s bullish attention to call options. What’s more, the July put/call OI ratio has risen to 1.26 from Thursday’s reading of 1.22. Puts are clearly in demand for TSLA stock right now.

Finally, if you jumped into Thursday’s trade recommendation for a July $350/$360 bear put spread, you are sitting pretty right now. Be sure to keep a close eye on TSLA stock for any rally back toward $350 and be ready to close out the trade for a maximum profit.

Amazon.com (AMZN)

AMZN stock has edged lower in the past couple of sessions as concern grows in the wake of a Supreme Court ruling on state tax collections. According to the court,  states have the legal right to collect sales taxes from digital retailers, regardless of whether or not the retailer has a physical presence in their state. This is bad news for many online retailers, but not for Amazon.

The company already collects state sales tax on first-party products in nearly every state. The ruling would only affect third-party sellers, and Amazon is well positioned to eat those costs for the time being, unlike so much with many of its online competitors.

AMZN options traders picked up on the discrepancy on Friday. Volume came in at 201,000 contracts, with calls making up 52% of the day’s take. This may not seem like much, but, due to the sheer size of AMZN options premiums, call buying is considerably thin on the stock.

Taking a closer look, AMZN’s July put/call OI ratio currently rests at 1.06. This reading indicates that calls are in near parity with puts. More importantly, this ratio has fallen over the past several weeks, an indication of rising bullish sentiment.

As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.

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