U.S. stock futures are trading broadly lower this morning. Once again, market sentiment is dependent on President Trump, as traders await his decision on the Iran nuclear deal this afternoon.
Furthermore, oil prices are down 1% below $70 per barrel this morning. Futures traders appear to be betting that Trump will pull out of the Iran deal.
Heading into the open, futures on the Dow Jones Industrial Average are down 0.21%, S&P 500 futures have fallen 0.26% and Nasdaq-100 futures have lost 0.33%.
Turning to the options pits, volume was anemic, arriving at its lowest levels in weeks. Only about 16.9 million calls and 13.1 million puts crossed the tape. On the CBOE, the light volume led to another drop in the single-session equity put/call volume ratio, which fell to 0.54. The 10-day moving average ticked lower to 0.64.
Options traders were reserved on Monday, choosing to stick to big names like Apple Inc. (NASDAQ:AAPL) and Warren Buffett’s renewed interest in the company. Additionally, the fallout from Tesla Inc’s (NASDAQ:TSLA) post-earnings conference call powered bullish options activity. Finally, JD.com, Inc. (NYSE:JD) call options were active ahead of this morning’s quarterly report.
Let’s take a closer look:
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Apple Inc. (AAPL)
The Oracle of Omaha continued to drive AAPL stock higher on Monday. Last week, Warren Buffett’s Berkshire Hathaway Inc. (NYSE:BRK-B) disclosed it bought $75 million in Apple stock in the first quarter. Yesterday, Buffett himself chimed in on Apple stock:
“I clearly like Apple. We buy them to hold,” Buffett told CNBC. “We bought about 5% of the company. I’d love to own 100% of it.”
AAPL shares rose to all-time highs following the comments, putting the company closer to a $1 trillion valuation. Options traders chased the shares higher.
Volume soared to 769,000 contracts despite the light volume session. Call options made up an above average 68% of the day’s take.
Short-term traders, however, are looking for a pullback. Currently, the May put/call open interest ratio rests at 1.29, with puts firmly in command of the near-term outlook.
Tesla Inc (TSLA)
Tesla CEO Elon Musk stirred up quite a controversy last week by lashing out at speculative day traders and short sellers last week. The comments overshadowed an otherwise solid quarterly earnings report. I believe that Musk did Tesla investors a favor with his candor, but that hasn’t stopped the financial media or the brokerage community from piling on.
Cash burn is the biggest concern for Tesla, according to analysts at CreditSights. The ratings firm yesterday claimed that Tesla’s “cash bleed” would probably double in the second quarter as the company ramps up Model 3 production.
But Tesla options traders have “been there, done that.” Instead, traders chose to focus on TSLA’s move back above $300, as calls claimed 58% of the more than 192,000 contracts traded yesterday.
But while optimism is growing, the May put/call OI ratio still rests at 1.25. With puts firmly entrenched in near-term OI configurations, it may take some time before this negativity is wrung out of the system.
JD.com, Inc. (JD)
Apparently 61% year-over-year revenue growth just isn’t fast enough for Wall Street. JD.com, the No. 2 e-commerce company in China, reported this morning that second-quarter revenue soared to 45.9 billion yuan ($7.4 billion), topping expectations. However, JD said it sees third-quarter revenue of between 43.2 and 44.7 billion yuan, up about 49% to 54% year over year and down from the prior quarter growth rate.
As a result, JD stock is volatile this morning, swinging from a loss of about 3% to up nearly 1% at last check. Options traders were clearly expecting a post-earnings rally, however.
Volume yesterday rose to 175,000 contracts, with calls gobbling up 75% of the day’s take. JD’s May put/call OI ratio rests at 0.75, which is down sharply from last month’s perch above 1. JD is still down about 12% since late January, and today’s earnings could still provide ballast.
As of this writing, Joseph Hargett held no positions on any of the aforemen