U.S. stock futures are headed higher this morning. Wall Street is looking to bounce back from yesterday’s losses. On Tuesday, traders took profits on news that Secretary of State Rex Tillerson was fired. Today, investors are looking ahead to key data on February retail sales, which are expected to rise 0.4%.
Heading into the open, Dow Jones Industrial Average futures have added 0.41%, S&P 500 futures are up 0.27% and Nasdaq-100 futures have gained 0.41%.
Turning to the options pits, volume was brisk on Tuesday. Overall, about 20.1 million calls and 17.1 million puts changed hands. The CBOE single-session equity put/call volume ratio held at 0.57. The 10-day moving average also held its ground at a six-month low of 0.61.
Taking a closer look at yesterday’s options activity, Apple Inc. (NASDAQ:AAPL) saw a marked falloff in daily bullish activity following reports that President Donald Trump was eyeing tariffs on Chinese tech. Elsewhere, Intel Corporation (NASDAQ:INTC) call activity shot higher after the Trump administration blocked Broadcom Ltd’s (NASDAQ:AVGO) takeover of Qualcomm, Inc (NASDAQ:QCOM). Finally, General Electric Company (NYSE:GE) was smacked lower by a bearish note from JPMorgan.
Apple Inc. (AAPL)
According to sources who had discussed the matters with the administration, President Trump is reportedly looking to impose $60 billion in tariffs on Chinese imports. The tariffs will target technology and telecommunications sectors heavily, and could be enacted “in the very near future.”
The report was a blow to Apple stock sentiment. The company relies heavily on Chinese manufacturers, including electronics manufacturing giant Foxconn Technology. AAPL options traders responded by moving away from bullish bets on the shares. Volume came in at a lackluster 511,000 contracts, below Apple’s daily average.
The lost volume was mainly made up of call activity. These typically bullish bets only accounted for 58% of the day’s take. In fact, looking out to April we find that speculative traders have grown increasingly negative on AAPL stock. During the past month, the April put/call open interest ratio on AAPL has risen to a reading of 0.84. This reading is in the upper 10% of all those taken in the past year.
Intel Corporation (INTC)
While Chinese tariffs could impact Intel’s operations, investors breathed a sigh of relief after Trump killed Broadcom’s takeover bid for Qualcomm on national security grounds. A combined Broadcom/Qualcomm would have posed a serious threat to Intel’s mobile processing revenue and could have made inroads into other market segments.
In fact, INTC stock options traders cheered the news, sending more than 287,000 contracts across the tape — doubling Intel’s daily average volume. What’s more, calls made up a whopping 82% of the day’s take.
Hidden among yesterday’s activity were several large call block trades. One of which was a block of 12,800 May $50 calls that were bought for an ask price of $4.75, or $4,750 per contract. In premarket activity, the May $50 call is trading more than $2 in the money.
General Electric Company (GE)
GE stock was dealt another blow yesterday. Analysts at JPMorgan said that GE’s full-year guidance for earnings between $1 and $1.07 per share was “disconnected” from its free cash flow guidance of 75 cents. The ratings firm also cut its price target to $11 from $14, a near 28% discount from current levels.
Options traders responded to the report with hopes for a rebound, however. Volume rose to over 405,000 contracts, nearly doubling GE’s daily average. Calls made up a better-than-average 66% of yesterday’s take.
Furthermore, GE has a considerable bullish following in the April options series. Currently, the April put/call OI ratio rests at 0.66, meaning that calls are on the verge of doubling puts in this back-month series. In other words, most of JPMorgan’s concerns may already be priced into GE options at this point.
As of this writing, Joseph Hargett was long on General Electric Company (GE) stock.