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Thursday’s Vital Data: Tesla, Alibaba and Advanced Micro Devices

Joseph Hargett

U.S. stock futures are mixed heading into the open. Wall Street is in earnings and economic data mode this morning, leaving the U.S./China trade war in the back seat for now.

stock market today

Economic data could set the tone for today’s session, including reports on weekly jobless claims, the July producer-price index and June wholesale inventories.

Against this backdrop, futures on the Dow Jones Industrial Average are up 0.9% while S&P 500 futures are up 0.11%. Nasdaq-100 futures, meanwhile, have added 0.08%.

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In the options pits, volume was considerably light on Wednesday. Only about 15.3 million calls and 13.8 million puts changed hands on the session. Over on the CBOE, the single-session equity put/call volume ratio pulled back to 0.62. The 10-day moving average held its ground at 0.64.

Options traders crashed into Tesla (NASDAQ:TSLA) yesterday following CEO Elon Musk’s tweet about taking the company private at $420 per share. Elsewhere, Alibaba (NYSE:BABA) saw activity spike ahead of next week’s earnings, while Advanced Micro Devices (NASDAQ:AMD) received some blowback ahead of Nvidia (NASDAQ:NVDA) quarterly report.

Let’s take a closer look:

Thursday’s Vital Options Data: Tesla, Alibaba and Advanced Micro Devices

Tesla (TSLA)

In a midday tweet on Tuesday, Tesla CEO Elon Musk said, “Considering taking Tesla private at $420. Funding secured.” The tweet put TSLA traders in a frenzy, sending the stock soaring and raising questions about whether or not Musk would, or even could, take Tesla private. The frenzy spilled over into the options pits yesterday, sending volume soaring.

Today, the SEC is getting involved.

TSLA options traders are apparently used to these kinds of antics. Thursday’s options activity was clearly divided between calls and puts, as traders were split on the potential outcomes of this week’s latest Musk drama.  Volume topped 530,000 contracts for TSLA yesterday, more than 2.4 times the stock’s daily average.

Calls barely won out in the end, claiming 52% of the day’s take. That said, puts are firmly in command in the back-month September series.

Currently, the September put/call open interest ratio rest at a lofty reading of 2.81, with puts nearly tripling calls in the series. This ratio has risen sharply this week, indicating that TSLA options traders aren’t taking Musk’s “going private” tweet seriously at all.

Alibaba (BABA)

We are two weeks away from an earnings report from Chinese ecommerce giant Alibaba. Options traders are already salivating at the potential outcomes. Currently, Wall Street is expecting a profit of $1.23 per share from Alibaba, with revenue seen soaring 62.8% to $81.68 billion.

EarningsWhispers.com puts the whisper number at $1.27 per share, indicating that sentiment seems to be discounting the potential impact of the U.S./China trade war.

Options traders are doing the same. Yesterday, volume swelled to over 257,000 contracts, pushing activity to about 1.3 times Alibaba’s daily average. Calls gobbled up 72% of the day’s take.

Looking at monthly August options for BABA (which expire next week), the put/call OI ratio comes in at 0.67. In other words, traders are moderately bullish on BABA stock heading into next week’s report.

However, we may not see the flair from a BABA post-earnings move that we are used to. August implied volatility is only pricing in a moderate move of about 3.65%

Advanced Micro Devices (AMD)

Earnings reports in the semiconductor sector have ripple effects. Next Thursday, Nvidia will step up to release its quarterly report, and analysts are already predicting a noisy quarter for the graphics chip specialist.  The repercussions of this report could create additional volatility for competitor AMD, and options traders are already preparing.

Volume yesterday came in at 183,000 contracts, about 65% of which were calls. AMD calls have been quite popular of late, after the company posted strong quarterly results and proved it was taking data center market share from Intel Corporation (NASDAQ:INTC).

Looking at August expiration, implied volatility is pricing in a 5.7% move for AMD stock in the wake of NVDA’s quarterly report. That’s a pretty impressive ripple, as it could take AMD past psychological resistance at $20 and help extend the stock’s rally.

As of this writing, Joseph Hargett was long on Advanced Micro Devices (AMD) stock.

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