U.S. stock futures are inching higher this morning as traders grapple with the ongoing implications of a meltdown in the oil markets. Crude oil experienced its largest down day in years yesterday falling over 7% on concerns of oversupply and slowing global demand. The crash came even after oil had already fallen eleven days in a row.
Against this backdrop, futures on the Dow Jones Industrial Average are up 0.44% and S&P 500 futures are higher by 0.51%. Nasdaq-100 futures have added 0.57%.
In the options pits, calls slightly outpaced puts while overall volume levels ended the day near average levels. Specifically, about 18.9 million calls and 17.3 million puts changed hands on the session.
Over at the CBOE, the single-session equity put/call volume fell for the second day in a row to 0.70. The 10-day moving average once again stayed pat at 0.66.
Options activity was a mixed bag on Tuesday. Macy’s (NYSE:M) saw renewed options interest ahead of its quarterly earnings report. Amarin (NASDAQ:AMRN) shares slid on fresh details on the Irish company’s fish oil drug, Vascepa. Finally, Starbucks (NASDAQ:SBUX) was flooded with activity on news that it was cutting 5% of its workforce.
Let’s take a closer look:
Traders took to the options market to place their bets ahead of this morning’s earnings release from the premier retailer, Macy’s. The stock has held up like a champ during the recent market bloodbath and headed into the quarterly report as one of the few securities still above its 20-day and 50-day moving averages.
Macy’s beat the Street’s expectations, reporting earnings per share of 27 cents.
On the options trading front, put volume spiked sharply. Activity swelled to 300% of the average daily volume, with 118,034 total contracts traded. And 63% of the trading came from put options.
As usual, implied volatility is running hot ahead of Macy’s earnings release. At 58%, it’s perched at the 78th percentile of its one-year range. Options traders were pricing in an earnings move of $3.58 or 10% making the 1% drop premarket a real snoozer. Chalk this up as a massive win for volatility sellers.
Promising results from a long-term cardiovascular outcomes trial involving Amarin’s fish oil pill, Vascepa, placed the company on the map in September with a jaw-dropping run that has since carried it from $3 to as high as $23.
However, new details released over the weekend in the New England Journal of Medicine and an accompanying company presentation are leading some to question whether the first reported cardiovascular benefits from the drug may have been overstated.
On the options trading front, calls slightly outpaced puts on the day. Activity lifted to 209% of the average daily volume, with 111,801 total contracts traded. Calls accounted for 54% of the day’s take.
With these additional details now released, the uncertainty factor for Amarin stock has diminished. Implied volatility has receded to 115%, which is admittedly still high. The daily expected moves now sit at 7.2%.
A memo sent by CEO Kevin Johnson revealed Starbucks is slashing 5% of its workforce as it modifies its organizational structure.
Recent earnings sent the stock to record highs by completing a three-year basing pattern. The positive fundamentals have allowed SBUX to remain completely untouched by the market correction that continues to ravage the rest of the Street.
On the options trading front, calls dominated the trading session despite the selling pressure in the underlying. Activity remained high at 240% of the average daily volume, with 108,488 total contracts traded. 87% of the trading came from call options alone.
Implied volatility remains elevated at 26% or the 68th percentile of its one-year range. Traders are pricing-in daily moves of 1.6%.
As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.
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