U.S. stock futures are are trending upward this morning, as Wall Street is set to follow Asian markets higher. Traders will be greeted with a pair of Federal Reserve speeches later today; one from Minneapolis Fed President Neel Kashkari and one from Dallas Fed President Rob Kaplan. That said, investors may be cautious today, as third-quarter earnings season kicks off tomorrow.
Heading into the open, futures on the Dow Jones Industrial Average have gained 0.25%, S&P 500 futures are higher by 0.21% and Nasdaq-100 futures have rallied 0.26%.
In the options pits, volume imploded on Monday, with only about 11.9 million calls and 11.2 million puts crossing the tape. On the CBOE, the single-session equity put/call volume ratio rose to 0.73, while the 10-day moving average ticked higher to 0.64.
Drilling down on Monday’s volume, General Electric Company (NYSE:GE) traders expressed their displeasure at the rather abrupt changes in leadership. Elsewhere, Alibaba Group Holding Ltd (NYSE:BABA) reported an impressive year-over-year jump in 2017 “Super September” promotion. Finally, the Advanced Micro Devices, Inc. (NASDAQ:AMD) rumor mill was churning again this morning, driving a massive wave of early speculation on the shares.
General Electric Company (GE)
There’s something rotten at GE — at least, that’s what analysts have surmised from the recent round of sudden leadership changes. Late on Friday, General Electric announced that CFO Jeffrey Bornstein was leaving the company and that vice chairs John Rice and Beth Comstock were retiring.
This trio followed on the heels of last week’s early retirement announcement from Jeffrey Immelt, who exited three months earlier than planned.
According to J.P. Morgan, these sudden changes back their belief that GE’s fundamental challenges are much worse than Wall Street is currently discounting. “We view this incremental new wrinkle as a clear negative,” J.P. Morgan said in a note to clients.
GE options traders appear to have reached a similar conclusion. On Friday, volume surged to 359,000 contracts, more than 3.5 times GE’s daily average. Puts took charge on the day, making up 52% of the day’s take. Monday’s activity wasn’t out of the norm, however, as the October put/call open interest ratio currently rests at a lofty 1.18.
Look for this ratio to rise further, as confidence continues to drop in GE following this management shakeup.
Alibaba Group Holding Ltd (BABA)
Chinese online retail giant Alibaba reported this weekend that participation it’s “Super September” sales promotion surged by nearly 200% year-over-year. Digging deeper, Alibaba.com, where the sales event was held, sported more than five million products from 50,000 suppliers in 26 sectors.
Additionally, participating buyers from developed countries increased by nearly 50% in one week since the promotion launched, while buyers from emerging markets accounted for 45% of total sales volume.
Despite the news, buying was muted on BABA stock, as the shares pushed yet again into all-time high territory. Options traders, however, appeared more than ready to chase a rally into no-man’s land. Volume surged to 190,000 contracts, with calls gobbling up 66% of the day’s take.
Overall, however, short-term BABA options traders remain very reluctant to shift bullish on the stock. For instance, the October put/call OI ratio rests at an elevated reading of 0.89 despite the recent attention to BABA calls. That said, there are still more than 33,000 call contracts open at the overhead Oct. $185 strike, indicating that there is still a healthy contingent of BABA bulls out there.
Advanced Micro Devices, Inc. (AMD)
Rumors, rumors and more rumors. AMD stock has been plagued by rumors this year, ranging from licensing deals with Intel Corporation (NASDAQ:INTC) and partnerships with Tesla Inc (NASDAQ:TSLA) earlier this year, to rumors of a potential buyout early on Monday. However, no real information ever emerged on this front (not even the name of the buyer).
Still, AMD spiked as much as 4% Monday morning as the rumor took hold like wildfire, then quickly died.
Options traders were also taken in, driving volume to 183,000 contracts on Monday. Calls made up 59% of the day’s take. The added call volume, however failed to make a dent in short-term sentiment on AMD, as the October put/call OI ratio still rests at a lofty 0.92.
This is even more disconcerting given that AMD is slated to report earnings in a couple weeks, leaving the company to face low expectations heading into this key event.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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