U.S. stock futures are moving higher this morning. Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.42% and S&P 500 futures are higher by 0.58%. Nasdaq-100 futures have added 0.63%.
In the options pits, volume fell off a cliff to one of the lowest readings in months. Approximately 14.2 million calls and 11.7 million puts changed hands on the session.
With optimism continuing to drive equity prices, calls continue to rule the roost. Yesterday’s dominance drove the single-session equity put/call volume ratio down to 0.57. Meanwhile, the 10-day moving average held steady at 0.63.
Let’s take a closer look:
Walgreens Boots Alliance (WBA)
The demise in Walgreens Boots Alliance shares quickened Tuesday after the pharmacy chain company released underwhelming earnings data. For their second fiscal quarter of 2019, WBA earned $1.64 per share on revenue of $34.6 billion. Both measures came in below analyst estimates.
WBA shares were punished to the tune of -12.8% for the misstep. With the massive markdown, Walgreens now sits at a five-year low. The technical take at this point is simple. It’s bearish across the board. Deteriorating fundamentals alongside a steep downtrend is creating a toxic environment for bulls. You should view rallies with skepticism.
On the options trading front, WBA was the most active stock on the field. Total activity rocketed to 894% of the average daily volume, with 132,312 total contracts traded. Puts won the day if slightly, accounting for 51% of the tally.
Because the 12.8% thrashing fell well outside of the expected move, implied volatility didn’t drop as much as usual after earnings. It currently sits at 28%, or the 32nd percentile of its one-year range.
Facebook capitalized on the bullish backdrop for technology stocks by jumping 3.3%. The rally places FB stock on the cusp of a breakout, though intraday the social media giant did tag a fresh seven-month high at $174.90.
The news was light, so I’m chalking the rally up to technical catalysts. Since ramping on earnings in January, FB has been treading water. With the 50-day moving average now caught up, it was time for the stock to rise anew. High volume accompanied the rally adding legitimacy to the move and suggesting it should have staying power.
On the options trading front, traders came after calls with a vengeance. Activity grew to 200% of the average daily volume, with 504,294 total contracts traded. 66% of the sum came from call options alone.
Implied volatility ended the day at 31% which places it at the 39th percentile of its one-year range. Premiums are pricing in daily moves of $3.35 or 1.9%.
Cisco Systems (CSCO)
Cisco shares are partying like its 1999. Though this year’s ascent doesn’t quite match the insane trajectory of its glory days, it’s about as close as we’ve seen the technology behemoth come over the past two decades.
Its newfound leadership in the tech sector has undoubtedly drummed up excitement in the options market. CSCO has made multiple appearances atop the most-active options leaderboard. Nothing brings buyers to the yard like fresh highs.
The price trend in CSCO stock is consistent and well-behaved. This week’s breakout is simply the latest in a long line of bullish patterns delivering profits to traders.
On the options trading front, traders went cuckoo for call options. By day’s end, activity grew to 192% of the average daily volume, with 101,702 total contracts traded. Calls ran the tables contributing 82% to the sum.
The increased demand drove implied volatility higher to 24% placing it at the 33rd percentile of its one-year range. Premiums are baking in daily moves of 82 cents or 1.5%.
As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.
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