U.S. stock futures are headed higher this morning, pointing to another positive open this week. Sentiment is improving on Wall Street amid a somewhat robust earnings season and slackening geopolitical tension.
On the economic front, the Federal Reserve’s Beige Book will arrive this afternoon. Investors will keep an eye out for this report for clues on the Fed’s outlook for the U.S. economy and inflationary pressures.
Against this backdrop, Dow Jones Industrial Average futures are up 0.3%, S&P 500 futures have added 0.31% and Nasdaq-100 futures are up 0.24%.
Turning to the options pits, volume bounced back sharply on Tuesday. Overall, about 19.5 million calls and 16.9 million puts changed hands on the session. The CBOE single-session equity put/call volume ratio popped to 0.68. The 10-day moving average ticked higher to 0.65.
Taking a closer look at Tuesday’s options activity, earnings preparations are in full swing for Facebook, Inc. (NASDAQ:FB) and Microsoft Corporation (NASDAQ:MSFT). Meanwhile, Apple Inc. (NASDAQ:AAPL) options traders were greeted with positive iPhone X news heading into the company’s upcoming quarterly report.
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Apple Inc. (AAPL)
Despite continued sluggish smartphone handset demand, Apple has found a way to come out on top once again. According to a recent report, the iPhone X raked in 35% of all smartphone profits in the fourth quarter. What’s more, the iPhone 8 arrived in second place with 19.1% of smartphone profit in the quarter.
It was a bullish sign for Apple heading into the company’s May 1 quarterly earnings report. Most AAPL options traders remain largely on the sidelines for now. On Tuesday, volume rose to just 376,000 contracts, well shy of Apple’s daily average. Calls accounted for a below average 57% of the day’s take.
When it comes to Apple earnings, however, there are still plenty of bulls. The weekly May 4 put/call open interest ratio rests at 0.50, with calls twice as popular as puts for options most affected by earnings. Implieds are pricing in a post-earnings move of about 4.2% for AAPL stock.
Facebook, Inc. (FB)
The daily deluge of negative media headlines is having a bearish effect on Facebook stock’s sentiment backdrop. This negativity has even taken a toll on Facebook’s options activity, judging by recent activity.
For instance, yesterday’s volume of 293,000 contracts arrived at less than half of the stock’s daily average. Furthermore, calls only made up 57% of the day’s take, well below FB’s average daily call percentage of 65%.
The company reports earnings next week, and options traders are surprisingly upbeat heading into the event. The weekly April 27 put/call OI ratio rests at 0.66, with calls nearly doubling puts for the series. Finally, April 27 implieds are anticipating a 5.2% move for FB stock following the event.
Microsoft Corporation (MSFT)
Microsoft will join the earnings parade on Thursday next week. Analysts are expecting a profit of 85 cents per share on revenue of $25.77 billion. EarningsWhispers.com puts the whisper number at 91 cents per share.
Microsoft stock options traders appear largely bullish ahead of the event. Volume on Tuesday came in at 213,000 contracts, well above MSFT’s daily average. Additionally, calls made up 62% of the day’s take.
Looking at weekly April 27 options, we find even more optimism. The April 27 put/call OI ratio rests at a lowly 0.47, with calls firmly in command. Additionally, implieds are pricing in a potential 4.5% move for MSFT stock. On a positive reaction, MSFT could top $100 following next week’s quarterly report, while a negative reaction would see the stock test support near $90.
As of this writing, Joseph Hargett was long on Microsoft Corporation (MSFT) stock.