Monday’s Vital Data: Snapchat, Tesla and Amazon

Stock Market

U.S. stock futures are trading broadly higher as traders return from the weekend. One of the biggest news items bolstering buying appetite is IBM (NYSE:IBM) buyout of Red Hat (NASDAQ:RHT) for $190 per share. The total price tag comes out to approximately $33 billion in cash and represents the tech giant’s largest acquisition ever.

Against this backdrop, futures on the Dow Jones Industrial Average are up 0.56% and S&P 500 futures are higher by 0.96%. Nasdaq-100 futures have added 1.09%.

In the options pits, put volume soared to its highest level in months. Specifically, about 26 million calls and a whopping 30 million puts changed hands on the session.

The elevated put trading was felt over at the CBOE, where the single-session equity put/call volume ratio rose to 0.80. The 10-day moving average ticked higher to 0.68.

Earnings continue to drive which stocks are popping up on active options screeners. Snap (NYSE:SNAP) saw put options active as the stock fell to new all-time lows following another disappointing quarterly report. Tesla (NASDAQ:TSLA) scored a price breakout on continued optimism following Wednesday’s “historic” quarter. Finally, Amazon (NASDAQ:AMZN) shares fell below the 200-day moving average after mildly disappointing the Street on earnings.

Let’s take a closer look:

Snap

Shareholders hoping Snap’s latest earnings release would provide something (anything!) to arrest its decline were disappointed. Though the social network app beat analyst estimates on revenue and earnings, worries over declining daily active users kept buyers at bay.

SNAP garnered $298 million in revenue topping analyst estimates of $283.2 million. Its earnings per share loss was 12 cents which was less than the expected 14 cent loss.

J.P.Morgan downgraded the stock following earnings. cutting its price target in half from $12 to $6.

The price action for SNAP stock has been utterly atrocious this year. With Friday’s slide, the year-to-date loss has now grown to 57%. With the stock at all-time lows and beneath every major moving average, traders should view future rallies with extreme skepticism.

On the options trading front, puts were active. Activity swelled to 274% of the average daily volume, with 377,537 total contracts traded. 61% of the trading came from put options alone.

Implied volatility fell back after the report and now rests at 79% which is the 63rd percentile of its one-year range. Traders are pricing-in daily moves of 5%.

Tesla

Tesla continues to frustrate short-sellers with its gravity defiance. Positive earnings boosted the stock last week, and the subsequent follow through delivered a rousing breakout on Friday. The aggressive buying was evident in volume patterns which showed TSLA had the highest volume up day since early-August.

After the closing bell on Wednesday, Tesla reported third-quarter results that galloped past Wall Street estimates. The electric-car maker reported earnings of $2.90 a share and revenue of $6.8 billion. Analysts were expecting a loss of 15 cents a share on revenue of $6.3 billion.

Here was the money statement from the press release: “Q3 2018 was a truly historic quarter for Tesla … Model 3 was the best-selling car in the US in terms of revenue and the 5th best-selling car in terms of volume.”

On the options trading front, calls won the day. Activity increased to 218% of the average daily volume, with 578,174 total contracts traded. Calls contributed to 54% of the total.

Implied volatility sits at 79% which is the 58th percentile of its one-year range. Traders are pricing-in daily moves of 5%.

Amazon

AMZN stock closed below the 200-day moving average for the first time since February 2016 in the aftermath of its Thursday night earnings release. The company reported $5.75 earnings per share on revenue of $56.6 billion. Earnings beat estimates by a wide margin while revenue fell short.

The revenue miss coupled with lukewarm guidance for Q4 resulted in a sell-fest. Though the losses were pared by day’s end, AMZN stock still ended down 8%.

On the options trading front, calls slightly outpaced puts on the day. Activity remained lofty at 196% of the average daily volume, with 435,009 total contracts traded. Calls accounted for 54% of the day’s take.

Implied volatility sits at 41% which is the 71st percentile of its one-year range. Traders are pricing-in daily moves of 2.6%.

As of this writing, Tyler Craig didn’t hold positions in any of the aforementioned securities. Want insightful education on how to trade? Check out his trading blog, Tales of a Technician.

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