U.S. stock futures are trading lower this morning. Losses are heavier in the tech-laden Nasdaq after Cisco Systems, Inc. (NASDAQ:CSCO) beat earnings but noted tightening margins. Walmart Inc (NYSE:WMT) is a highlight, however, after posting better-than-expected results driven by strong online sales.
Ahead of the open, futures on the Dow Jones Industrial Average were down 0.17%. S&P 500 futures were last seen lower by 0.25% and Nasdaq-100 futures have lost 0.53%.
In options activity, volume returned to normal on Wednesday, bouncing back from recent lows. About 18.8 million calls and 13.7 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio plunged to a year-to-date low of 0.50. Furthermore, The 10-day moving average fell to 0.59 — a four-month low.
Once again, options traders were more interested in the dealings of Warren Buffet and data leaks than corporate earnings. Facebook, Inc. (NASDAQ:FB) had the most actively traded options yesterday following news that data on three million users was exposed.
Meanwhile, Apple Inc. (NASDAQ:AAPL) options traders piled into calls after Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) confirmed it bought 75 million more shares of AAPL stock. Finally, Alibaba Group Holding Ltd (NYSE:BABA) traders focused on the stock’s current battle with resistance at $200.
Let’s take a closer look:
Facebook, Inc. (FB)
More carelessness with user data emerged at Facebook this week. Researchers at the University of Cambridge uploaded data from 3 million users onto a shared portal. The data was locked, but the credentials were available to anyone with halfway decent Google search skills. The release follows on the heels of the Cambridge Analytica debacle, and arrives just ahead of CEO Mark Zuckerberg’s privacy meeting with European Parliament.
Since the news broke on Monday, FB stock is down more than 2%. FB options traders have taken notice. Volume yesterday rose to nearly 544,000 contracts, with calls making up 62% of the day’s take.
While it may appear that FB options traders are brushing aside the latest data breach, profit taking appears to be the main reason for the increased call volume. Specifically, the June put/call open interest ratio continued to rise sharply, advancing from 0.72 on Monday to 0.76 today. This reading stood at 0.7 a week ago. So, while puts may not be as popular as calls in the daily volume listings, call traders are abandoning or rolling out their FB positions in droves.
Apple Inc. (AAPL)
Warren Buffet is at it again with Apple stock. In a 13-F filing, Berkshire Hathaway reported that it bought nearly 75 million more shares in Apple in the most recent quarter. Berkshire now owns some 239.5 million shares of AAPL stock and is the company’s second largest shareholder.
AAPL stock rose nearly 1% on the news, and Apple options traders piled into calls. Volume yesterday rose to 450,000 contracts, with calls accounting for 55% of the day’s take. Like Facebook, however, Apple call traders are either taking profits or rolling into longer-dated positions.
Following the most recent flurry of call volume, Apple’s June put/call OI ratio rose from 0.97 on Friday to today’s reading of 1.01. Puts are now the most popular contract in the soon-to-be front-month June series.
Alibaba Group Holding Ltd (BABA)
Since hitting a low near $166 in late April, Alibaba stock has jumped nearly 20%. Providing fuel for that rally was the company’s recent blowout earnings report, where revenue grew 62% — the eighth time in a row Alibaba has seen revenue grow more than 50% year-over-year.
The report naturally drew bullish options traders to BABA stock. And that volume continued yesterday. More than 295,000 contracts traded on Alibaba yesterday, with calls gobbling up 64% of the day’s take. But, given BABA’s lofty June put/call OI ratio of 0.97, I would suspect there are quite a few profit takers here as well.
Furthermore, BABA stock’s post-earnings rally drove the shares straight into resistance near $200. This psychologically significant hurdle has been a thorn in BABA’s side for the past week. Today, with Alibaba stock down almost 1% in premarket trading, it looks like the bulls have finally relented to profit taking.
As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.
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