U.S. stock futures are trading broadly lower this morning. Wall Street was clearly anxious ahead of this morning’s April jobs report. Expectations were for a gain of 188,000 last month, on the heels of March’s surprisingly low 108,000 job adds.
Meanwhile, corporate earnings continue to chug along. Alibaba Group Holding Ltd (NYSE:BABA), Celgene Inc. (NASDAQ:CELG) and GoPro Inc. (NASDAQ:GPRO) are front and center on the earnings front.
Heading into the open, futures on the Dow Jones Industrial Average are down 0.33%, S&P 500 futures have shed 0.35% and Nasdaq-100 futures have lost 0.42%.
Turning to the options pits, volume rebounded to normal levels on Thursday. Overall, about 19.9 million calls 18.8 million puts crossed the tape. Despite the jump in call activity, the CBOE single-session equity put/call volume ratio surged to a one-month high of 0.75. The 10-day moving average also moved higher, hitting it’s own one-month high of 0.66.
Options traders were once again paying sharp attention to the semiconductor sector. News broke that “next generation” flaws were again found in Intel Corporation (NASDAQ:INTC) chips, driving heavy volume on INTC stock. Additionally, NXP Semiconductors N.V. (NASDAQ:NXPI) reported weaker-than-expected earnings, drawing attention to options arbitrage spreads in it’s Qualcomm Inc. (NASDAQ:QCOM) merger deal. Finally, Alibaba Group Holdings was call heavy heading into this morning’s quarterly earnings report.
Let’s take a closer look:
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Intel Corporation (INTC)
Options traders loaded up on Intel calls yesterday. It was an interesting reaction to news that “next generation” flaws had been found in Intel semiconductors. Specifically, a German computing magazine reported yesterday that researchers found eight new flaws in INTC chips resembling the Meltdown and Spectre bugs revealed earlier this year.
Intel said it was aware of the flaws and was working to patch them. “We believe strongly in the value of coordinated disclosure and will share additional details on any potential issues as we finalize mitigations,” Intel said in a statement.
In a “been there, done that” kind of response, INTC options traders loaded up on call options following the news. Volume came in at 177,000 contracts, with calls gobbling up 83% of the day’s take.
Looking out to May options, the bulls appear to be in firm control of Intel’s short-term sentiment backdrop. Currently, the May put/call open interest ratio comes in at 0.45, with calls more than doubling puts for the series.
But this Intel optimism is not without merit. In fact, INTC stock continues to outperform most of its semiconductor peers, including red-hot names like Advanced Micro Devices, Inc. (NASDAQ:AMD) and Micron Technology Inc. (NASDAQ:MU).
NXP Semiconductors N.V. (NXPI)
If you are arbitraging Qualcomm’s buyout of NXP Semiconductors, yesterday was painful for you. NXPI stock plunged more than 10% after the company missed Wall Street’s first-quarter earnings target by 12 cents per share. NXPI is now trading about 36% below Qualcomm’s buyout offer of $127.50 per share.
The deal has been slowed by Chinese regulators, whom many argue are dragging their feet due to troubled China/U.S. trade relations.
NXPI options traders were somewhat bullish following the news. Volume rose to 190,000 contracts, nearly tripling NXPI’s daily average. Calls made up about 58% of the day’s take. But while short-term options are optimistic, August options are downright bearish.
Qualcomm and NXP expect a ruling from China by their new deal deadline of July 25. If the August put/call OI ratio of 1.80 is any indication, NXPI options traders believe the deal will fall apart.
Alibaba Group Holding Ltd (BABA)
Alibaba calls were quite popular ahead of this morning’s quarterly report. Volume rose to an impressive 406,000 contracts, with calls eating up 71% of the day’s take. As a result, the May put/call OI ratio fell to 0.67 as traders bet on a post-earnings rally.
Heading into the open, BABA stock is up 1.5% amid a weak start among the major market indexes.
By the numbers, Alibaba posted another blowout quarter. Earnings rose 32% year-over-year to 90 cents per share, topping expectations by 5 cents per share. Sales surged 61% to $9.73 billion, easily beating Wall Street’s view for $9.3 billion.
As of this writing, Joseph Hargett held no positions on any of the aforemen