Wednesday’s Vital Data: General Electric, Facebook and General Motors

Stock Market

U.S. stock futures are trading broadly higher this morning after bulls clinched a rare victory yesterday. Buyers are trying to recoup the steep losses plaguing stocks into month end. Here’s your odd yet entirely believable stat of the day, shared yesterday by @RyanDetrick.

“Unless the S&P 500 closes green today and tomorrow, this will be the first time in history the month of October doesn’t have back-to-back gains.” Well, we got one day. Can the markets make it two for two?

Heading into the open, futures on the Dow Jones Industrial Average are up 0.91% and S&P 500 futures are higher by 1%. Nasdaq-100 futures have added 1.54%.

In the options pits, put volume fell back as bulls were finally able to push stocks to the days high and keep them there into the closing bell. Specifically, about 20.4 million calls and 19.3 million puts changed hands on the session.

At the CBOE, put demand ebbed, driving the single-session equity put/call volume ratio back to 0.69. The 10-day moving average remained at its highest level since February at 0.70.

Options traders zeroed in on earnings announcements. General Electric (NYSE:GE) puts were on the move amid a trifecta of bad news surrounding its conference call. Facebook (NASDAQ:FB) saw renewed options interest as traders jockeyed for position ahead of last night’s earnings release. Likewise, General Motors (NYSE:GM) options were hot ahead of this morning’s earnings report.

Let’s take a closer look:

General Electric (GE)

The optimism that ushered General Electric into October on the heels of its CEO change has officially been upended. GE stock had rallied as high as $13.78 in the aftermath of the news but has rapidly fallen 26% since.

Investors smashed the sell button on Tuesday following a trifecta of disappointments. First up was the earnings release, which fell far short of expectations. Second was the slashing of its quarterly dividend from 12 cents to a mere penny. Third were comments from GE’s CFO Jamie Miller during the conference call that the SEC and Department of Justice were both broadening their investigations of the company’s accounting practices.

On the options trading front, put popularity exploded Tuesday. Activity swelled to 333% of the average daily volume, with 1,354,965 total contracts traded. It’s incredibly rare to see daily options volume surge past one million contracts for a single stock. Puts accounted for 68% of the total.

Implied volatility deflated on the day as earnings uncertainty was swiftly removed from option premiums. Still, at 55% the implied volatility remains lofty at the 74th percentile of the one-year range.

Facebook (FB)

Facebook stepped up to the earnings plate, and much to the satisfaction of shareholders was able to put the ball into play. FB stock is trading broadly higher in the premarket session. The social network pioneer reported earnings of $1.76 per share on revenue of $13.7 billion. Meanwhile, daily active users averaged 1.49 billion representing a year-over-year increase of 9 percent.

Facebook was one of the first tech titans to lose its luster mid-year, so it would be fitting if yesterday’s earnings announcement led to a market turnaround.

On the options trading front, calls outpaced puts on the day. Activity ramped to 210% of the average daily volume, with 643,068 total contracts traded. 58% of the total came from calls.

The expected move into last night’s report was $11.19 or 7.7%. As of 8:21 AM EST, FB is trading higher by $8.18, so the reaction is thus far illustrating the wisdom of the options crowd.

General Motors (GM)

General Motors shares are soaring pre-market on blowout quarterly results. The upside surprise comes as a welcome development for the auto sector which has been sagging for months over tariff and trade war woes.

GM reported adjusted earnings per shares of $1.87 on $35.8 billion. Both numbers sailed pass expectations of $1.25 and $34.85 billion, respectively.

The stock is set to open well above the descending trendline that has defined its behavior for the past four months, and the 50-day moving average. Upside follow-through could carry it back toward the 200-day moving average at $38.

On the options trading front, calls were extremely active all day long. Activity jumped to 188% of the average daily volume, with 90,325 total contracts traded. Calls accounted for 71% of the day’s take.

The expected move into last night’s report was $1.88 or 5.6%. As of 8:39 AM EST, GM stock is jumping $2.63 pre-market or 7.8% which is far more than what was priced-in.

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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