Thursday’s Vital Data: Autodesk, Costco and Bank of America
U.S. stock futures are trading higher this morning. Daily turns in the trade war narrative continue to drive stock prices. Today’s boost is coming after China’s commerce ministry said they “firmly reject and escalation of the trade war.”
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Heading into the open, futures on the Dow Jones Industrial Average are up 0.88%, and S&P 500 futures are higher by 0.83%. Nasdaq-100 futures have added 1.08%.
Yesterday’s action in the options pits saw put volume almost catch up to calls, even as overall volume remained below average. Specifically, about 14.7 million calls and 14 million puts changed hands on the session.
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Meanwhile, over at the CBOE, the single-session equity put/call volume ratio matched Tuesday’s reading at 0.64. The pair of lower readings reflect a market that is trying to return to normal. The 10-day moving average slipped to a two-week low at 0.70.
Options trading was buzzing in Autodesk (NASDAQ:ADSK), Costco (NASDAQ:COST) and Bank of America (NYSE:BAC).
Let’s take a closer look:
Autodesk (ADSK)
Autodesk shares plunged Wednesday morning after lowering its earnings forecast, but buyers emerged to pare the losses by the closing bell. What began as a 12.5% down open mercifully morphed into a 6.7% loss by day’s end. It was still a beating, but not nearly as ugly as it could have been.
The concerns weren’t centered around last quarter’s earnings. Autodesk actually bested estimates, growing sales by 30% year-over-year. Instead, investors’ ire was targeted toward the software company’s downbeat forward guidance due to trade war concerns.
The technical picture for ADSK stock deteriorated mid-year, and it was already limping into the report. With yesterday’s whack, the shares slipped below yet another support zone, and while the intraday rally was impressive, there is now a ton of resistance to work through. Until we work back above $150, sellers hold the upper hand.
On the options trading front, traders favored puts throughout the session. Activity soared to 781% of the average daily volume, with 93,267 total contracts traded. Puts accounted for 58% of the tally.
Costco (COST)
Costco shares scored a beautiful breakout this week, coming within pennies of tagging $300 a share. Volume surged alongside the rally, confirming institutions were entering the fray. This legitimizes the resistance breach and makes it that much more likely that the stock stays aloft.
COST stock has exhibited relative strength during the recent market turmoil. That fact that it is one of the first stocks popping to new highs shouldn’t be surprising. Perhaps some of the buying is due to investors piling in ahead of the dividend. The stock trades ex-dividend today, pricing out its next quarterly payment of 65 cents.
There’s no doubt the dividend is what launched options trading to the moon. Activity rocketed to 567% of the average daily volume, with 106,955 total contracts traded; 78% of the trading came from call options alone.
Implied volatility has been rising in anticipation of Costco’s next earnings announcement. At 27%, the reading sits at the 60th percentile of its one-year range. Premiums are pricing in daily moves of $4.94 or 1.7%.
Bank of America (BAC)
Beaten down banks came to life Wednesday. Bank of America led the way rallying 1.4% at a critical juncture. Its price chart has been chipping away at multi-month support, but buyers swooped in to save it from breaking down. Upside follow-through is still needed to confirm the turnabout though. We’ve seen many failed rally attempts this month.
That said, the risk-reward for bullish trades is attractive with potential support sitting at yesterday’s low.
On the options trading front, calls outpaced puts by a wide margin. Total activity grew to 101% of the average daily volume, with 262,070 contracts traded; 65% of the trading came from call options alone.
Implied volatility is hovering at 30% or the 37th percentile of its one-year range. That puts the expected daily move at 51 cents or 1.9%.
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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