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Thursday’s Vital Data: Cisco Systems, Inc., Target Corporation and Nvidia Corporation

Joseph Hargett

Driven by a solid round of corporate earnings, U.S. stock futures are rebounding from yesterday’s heavy losses. Cisco Systems, Inc. (NASDAQ:CSCO) and Wal-Mart Stores Inc (NYSE:WMT) sounded the rally cry this morning with better-than-expected results. Oil prices, however, remain lower and a glut of economic data is also on tap later this morning.

Thursday’s Vital Data: Cisco Systems, Inc., Target Corporation and Nvidia Corporation

Heading into the open, Dow Jones Industrial Average futures are up 0.30%, S&P 500 futures have added 0.34% and Nasdaq-100 futures have jumped 0.45%.

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On the options front, volume was average despite yesterday’s selloff. Overall, about 16.8 million calls and 15.6 million puts changed hands. On the CBOE, the single-session equity put/call volume ratio spiked to a three-month high of 0.74, though the 10-day moving average held at 0.65.

As for Wednesday’s options activity, Cisco Systems saw heavy call volume heading into last night’s quarterly earnings report, while Target Corporation (NYSE:TGT) traders had little to cheer about after the stock tanked nearly 10% following mediocre guidance. Finally Nvidia Corporation (NASDAQ:NVDA) continues to see heavy call options volume in the wake of Monday’s quarterly report.

Thursday’s Vital Options Data: Cisco Systems, Inc. (CSCO), Target Corporation (TGT) and Nvidia Corporation (NVDA)

Cisco Systems, Inc. (CSCO)

Cisco gave investors quite a bit to cheer about last night. The company posted better-than-expected fiscal first-quarter earnings of  61-cents-per-share compared to the consensus estimate for 60-cents-per-share. Revenue came in at $12.14 billion, beating the Street’s view of $12.11 billion.

Cisco also placed second-quarter guidance above expectations. The company now sees earnings of 59-cents-per-share versus a consensus target of 58 cents, while revenue is expected to grow between 1% and 3% compared to Wall Street’s 1% gain target of $11.58 billion.

Ahead of the event, CSCO options traders were quite call heavy. Volume topped 181,000 contracts, more than tripling Cisco’s daily average. Calls made up 65% of the day’s take. This optimism dovetails with a heavy call stance in the December series, where the put/call open interest ratio stands at 0.61.

That said, peak call OI of roughly 45,000 contracts at the $35 strike will be trading firmly in the money shortly after the open. CSCO stock is up more than 7% at $36.50 in premarket action.

Target Corporation (TGT)

Target really missed the mark this earnings season. The struggling retailer said it expected fourth-quarter earnings of between $1.05- to $1.25-per-share, putting Wall Street’s target of $1.24-per-share near the high end. Additionally, same-store sales are now seen flat to just 2% higher, with full-year sales arriving flat to just 1% higher.

Options volume was brisk on TGT stock as a result, with the more than 153,000 contracts traded ballooning to more than five times the stock’s daily average. Calls managed to attract 57% of the day’s take, but that total still arrived below average for TGT.

Overall, TGT options traders have a middling view of the stock heading into December expiration. Currently, the put/call OI ratio arrives at 0.80, with puts nearing parity with calls among back-month options. Peak call OI totals 7.900 contracts at the deep out of the money $62.50 strike, while peak put OI of 12,300 contracts lies at the $52.50 strike.

Nvidia Corporation (NVDA)

NVDA stock rallied hard on Monday, driving by a solid quarterly earnings report. The shares have spent the ensuing days consolidating those gains, with Wednesday’s broad-market pullback threatening to push NVDA stock below support at $210. The shares are rebounding back above this support level this morning, and it appears that options traders were anticipating just such a move.

NVDA saw more than 131,000 contracts trade on Wednesday — a far cry from recent earnings-related activity. However, calls made up 60% of the day’s take, keeping the bias positive in the options pits. But that positive bias only exists among speculative front-month traders.

Pulling back to the December options series, we find that the put/call OI ratio soars to a perch of 1.36, with puts easily outnumbering calls among back-month options. This pessimism hints that options traders are worried that NVDA’s current lofty valuation won’t hold for long.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.

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