Wednesday’s Vital Data: General Motors, IBM and Wells Fargo

Stock Market

U.S. stock futures are trading broadly higher this morning after election results reveal the Democrats wrested back control of the House for the first time in eight years.

In early morning trading, futures on the Dow Jones Industrial Average are up 0.63% and S&P 500 futures are higher by 0.73%. Nasdaq-100 futures have added 0.98%.

In the options pits, the quiet trading day drove overall volume levels back toward average levels. Specifically, about 15.1 million calls and 14.4 million puts changed hands on the session.

Over at the CBOE, the single-session equity put/call volume ratio rebounded slightly to 0.67. Meanwhile, the 10-day moving average held its ground at 0.67.

Options activity was light on Monday with little news events driving our list of most-actives. General Motors (NYSE:GM) saw continued options interest following its recent earnings win. IBM (NYSE:IBM) benefited from news of its CEO purchasing $3 million in stock. Finally, Wells Fargo (NYSE:WFC) saw an increase in put trading.

Let’s take a closer look:

General Motors (GM)

General Motors recent earnings release pole-vaulted the stock out of a downtrend and continues to keep the stock aloft. Market moving news was absent yesterday, but active options trading still put GM on the map.

The post-earnings price action is building a clean high base pattern that should resolve itself higher.

On the options trading front, calls outpaced puts on the day. Activity swelled to 169% of the average daily volume, with 96,113 total contracts traded. Calls accounted for 61% of the day’s take.

The post-earnings volatility crush has been in full force over the past week driving volatility back down to 31% or the 44th percentile of its one-year range. Traders are now pricing in daily moves of 2% for GM.

International Business Machines (IBM)

IBM’s recent record-breaking $34 acquisition of Red Hat (NASDAQ:RHT) initially delivered a 4% loss to the stock. But with this week’s rebound the tech juggernaut is now trading higher than when the news was first announced.

Following the acquisition announcement, IBM CEO Ginni Rometty snatched up $3 million worth of the company’s stock.

Shares of IBM remain firmly entrenched in a downtrend so it remains to be seen if this week’s rally can go the distance. For now, my dead-cat bounce meter is going off.

On the options trading front, traders came after calls with a vengeance. Activity lifted to 167% of the average daily volume, with 97,863 total contracts traded. Calls garnered 77% of the total.

Implied volatility remains lofty for IBM options. It’s actually higher than where it sat heading into the earnings release, and that’s saying something about the level of uncertainty baked into expectations right now. At 28%, the implied volatility rests at the 73rd percentile of its one-year range. Traders are now pricing in daily moves of 1.8%.

Wells Fargo (WFC)

A quick scan revealed little by way of news driving Wells Fargo yesterday. The bank did score an upgrade to a buy rating last Friday from Citigroup (NYSE:C).

Nonetheless, a light trading day in stocks elsewhere allowed WFC to jump to the top of the options active list for the day.

After a volatile October, WFC shares remain in hot mess mode. With the stock below a falling 50-day and 200-day moving average, sellers maintain the upper hand here.

On the options trading front, put options won the popularity contest. Activity ramped to 152% of the average daily volume, with 102,417 total contracts traded. 62% of the trading fell on the put side of the ledger.

Implied volatility has been retreating but remains historically high at 26%. It now rests at the 53rd percentile of its one-year range and traders are pricing in daily moves of 1.7%

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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