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Monday’s Vital Data: Snap, General Electric and Disney

Tyler Craig

U.S. stock futures are trading lower amid slight profit-taking after last week’s strong rally. Heading into the open, futures on the Dow Jones Industrial Average are down 0.40% and S&P 500 futures are lower by 0.19%. Nasdaq-100 futures have shed 0.24%.

Monday's Vital Data: Snap (SNAP), General Electric (GE) and Disney (DIS)

In the options pits, call volume continued its dominance streak, outpacing puts by a wide margin. Specifically, about 18.5 million calls and 14.8 million puts changed hands on the session.

The action at the CBOE left little to discuss. The single-session equity put/call volume ratio remained at 0.59 while the 10-day moving average slipped to 0.62.

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Options traders followed the analysts on Friday. Snap (NASDAQ:SNAP) shares surged after scoring an upgrade from RBC Capital Markets. General Electric (NYSE:GE) is trading lower premarket on a downgrade from J.P. Morgan (NYSE:JPM). Finally, Disney (NYSE:DIS) calls were hopping with the stock closing in on overhead resistance.

Let’s take a closer look:

Snap (SNAP)

SNAP stock is looking up for the first time in, well, ever. The parent company of Snapchat has been on a bullish roll since the turn of the year and generated a breakout to fresh seven-month highs. The fun continued after-hours on Friday after the company nabbed an upgrade from RBC’s Mark Mahaney from “Sector Perform” to “Outperform.”

Alongside the rating shift, Mr. Mahaney also raised his price target 70% from $10 to $17. SNAP stock is poised to open 4.56% higher this morning.

On the technical front, SNAP is now firing on all cylinders. It’s perched above a rising 20-day and 50-day moving average. Volume patterns continue to support bulls with multiple accumulation days cropping up over the past two months.

Friday’s breakout lit a fire under call demand. Activity climbed to 271% of the average daily volume, with 274,987 total contracts traded. 69% of the trading came from call options alone. Implied volatility held steady at 68%, placing it at the 44th percentile of its one-year range. Premiums are pricing in daily moves of 51 cents, or 4.2%.

General Electric (GE)

General Electric shares ended the week with a whimper, falling two cents in an uninspiring session. The lack of fireworks didn’t keep traders from making a mad dash for put options, however. With GE stock stuck in a super tight, three-week range, perhaps they were banking on a downside resolution.

This morning the speculation will pay off because a downgrade by J.P. Morgan analyst Stephen Tusa has the stock trading down 5.79% premarket. As reported by CNBC, here’s the money statement in Stephen Tusa’s message to clients:

“We believe many investors are underestimating the severity of the challenges and underlying risks at GE, while overestimating the value of small positives, and with a 38% move in the stock year to date, and >50% cuts to forward fundamental FCF (free cash flow) anchors, we are cutting our [price target] and moving to” underweight.”

The price target was lowered from $6 to $5.

On the options trading front, puts ruled the roost on Friday. Activity ramped to 156% of the average daily volume, with 359,741 total contracts traded. Puts accounted for 79% of the sum.

The increased demand drove implied volatility higher on the day to 46%, placing it at the 37th percentile of its one-year range. Premiums are now baking in daily moves of 29 cents, or 2.9%.

Disney (DIS)

Last week’s recovery in DIS stock ended on a high note with a retest of pivotal resistance. The rally carried Disney back above all major moving averages officially healing all of the damage inflicted last month when its purchase of 21st Century Fox.

A break above $115 should tee the stock up for a test of last year’s highs of $120.20.

On the options trading front, calls were the hot ticket. Activity grew to 135% of the average daily volume, with 131,844 total contracts traded. Calls drove 75% of the total.

Implied volatility closed at 24% placing it at the 37th percentile of its one-year range. Premiums are baking in daily moves of $1.73 or 1.5%.

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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