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Tuesday’s Vital Data: General Electric Company (GE), Twitter Inc (TWTR) and Microsoft Corporation (MSFT)

Joseph Hargett

Editor’s Note: Vital Data will be taking a short hiatus, and will return on June 18. 

U.S. stock futures are trading higher this morning. The Nasdaq Composite is eyeing record highs once again after tech stocks drove the index to its first record close in months.

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U.S. economic data has been largely responsible for Wall Street’s rally. However, trade war fears could emerge again as we head toward the G7 economic summit this Friday in Canada.

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Heading into the open, Dow Jones Industrial Average futures are up 0.03%. S&P 500 futures have added 0.05% and Nasdaq-100 futures have risen 0.14%.

In options activity, volume backed off its recent breakneck pace on Monday. Overall, about 17.7 million calls and 12.9 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio fell to 0.55. The 10-day moving average ticked lower to 0.60.

Options traders were put heavy on General Electric Company (NYSE:GE) after several analysts raised capital and dividend concerns. Meanwhile, Twitter Inc (NYSE:TWTR) was flooded with call options ahead of its joining the S&P 500. Finally, Microsoft Corporation (NASDAQ:MSFT) options traders were bullish on the company acquisition of open-source development platform GitHub.

Let’s take a closer look:

Tuesday’s Vital Options Data: General Electric Company (GE), Twitter Inc. (TWTR) and Microsoft Corporation (MSFT)

General Electric Company (GE)

Dividend concerns are once again rearing their ugly heads at General Electric. UBS said on Friday that GE would be able to maintain its dividend, but only by a slim margin. JPMorgan was not as convinced. The ratings firm said that GE could need an additional $30 billion to $40 billion to de-risk, and to do so, it needs to cut its dividend.

GE options traders took those concerns to heart. Volume on Monday came in at 321,000 contracts, with puts claiming 58% of the day’s take. Digging a little deeper reveals that the weekly June 20 $13 and $14 strike puts were quite popular yesterday.

According to Trade-Alert.com, more than 40,000 contracts traded on both the weekly June 20 $13 and $14 strike puts. Overall activity indicates that the $14’s were popular with put buyers and the $13’s were likely sold. This could be evidence of bear put spread activity, with traders looking for GE to fall to $13 or below in the next two weeks.

Twitter Inc (TWTR)

Twitter is replacing Monsanto Company (NYSE:MON) on the S&P 500 Index this Thursday. TWTR stock surged on the news, rallying more than 3% yesterday and another 4% in premarket activity this morning. The rally has TWTR stock rapidly nearing a key technical hurdle at $40, with investors anticipating bullish results from the added exposure.

TWTR options traders chased yesterday’s rally. Volume swelled to over 242,000 contracts, coming in at more than triple Twitter’s daily average. Calls made up 81% of the day’s take.

A closer look at the activity indicates that one trader likely closed out a calendar spread targeting the June $25 call and December $30 call. Each strike saw a block of 10,000 contracts cross, marked spread, at about 11 a.m. yesterday, according to Trade-Alert.com.

Despite the influx of call activity, there is still a fair amount of short-term pessimism on TWTR stock. Specifically, the June put/call open interest ratio comes in at 0.85. If TWTR manages to breakout above $40, look for this ratio to plummet heading into next week’s expiration.

Microsoft Corporation (MSFT)

In a move that many are calling a “return to its roots,” Microsoft announced it was buying software developer platform GitHub for $7.5 billion. GitHub hosts more than 28 million software developers and provides a platform for them to host and review open source code.

“Overall, this acquisition puts Microsoft ahead in the web hosting market against fierce competitors Amazon Web Services and Google, and creates an incentive for many more app developers to host on Azure,” J. Gold Associates said in a report.

MSFT stock has been a focus of options traders since the shares topped $100 on Friday last week. Volume following the GitHub news soared to 219,000 contracts, with calls accounting for 72% of the day’s take.

Turning to July options, Microsoft’s put/call OI ratio has dropped to 0.58 as calls are added at a faster rate than puts among back-month options. This trend should continue for the time being, as MSFT stock builds a base above $100.

As of this writing, Joseph Hargett held no positions on any of the aforementioned securities.

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