Friday’s Vital Data: Walmart, Nvidia and Alibaba

Stock Market

U.S. stock futures are trading sharply lower this morning despite buyers stepping in on Thursday to prevent the market from falling for the sixth day in a row. The overnight gap is reversing much of the gains garnered during yesterday’s strong rebound, proving the difficulty of trading in this volatility riddled market.

In early morning trading, futures on the Dow Jones Industrial Average are down 0.36% and S&P 500 futures are lower by 0.38%. Nasdaq-100 futures have shed 0.9%.

In the options pits, call volume slightly outpaced puts even as overall volume finished well above average levels. Specifically, about 22.4 million calls and 21.8 million puts changed hands on the session.

The retreat in put demand made waves over at the CBOE, where the single-session equity put/call volume ratio slid back to 0.73. The 10-day moving average continued its climb to 0.70.

Options traders zeroed in on quarterly earnings reports yesterday. Walmart (NYSE:WMT) saw renewed options interest as traders unwound their earnings bets into the stock’s modest gap. Nvidia (NASDAQ:NVDA) options were hot ahead of last night’s earning, which took its share price down some 18% after hours. Finally, Alibaba (NYSE:BABA) shares scored a breakout over the 50-day moving average.

Let’s take a closer look:

Walmart (WMT)

Shareholders hoping for a repeat of last quarter’s monster post-earnings gains were left with disappointment this week following Walmart’s latest earnings report. The retail giant fell 2% yesterday despite beating the Street’s top and bottom line estimates. WMT reported third-quarter earnings of $1.08 per share on revenue of $124.89 billion. Analysts were expecting earnings of $1.01 per share on $125.55 billion revenue.

Selloff notwithstanding, WMT remains one of the most technically sound stocks in the market. As long as it remains above the rising 50-day moving average (now at $97.50), the post-earnings swoon is only a flesh wound.

On the options trading front, volumes were split 50-50 between calls and puts. Activity swelled to 254% of the average daily volume, with 139,375 total contracts traded.

The usual volatility crush was in full force driving implied volatility down to 23% or the 34th percentile of its one-year range. Options premiums are now pricing in daily moves of 1.5%.

Nvidia (NVDA)

Semiconductors lie at the epicenter of all that is ailing the market these days. These high-growth stocks formed the backbone of the Nasdaq’s leadership that is now being dismantled. Wounded shareholders holding out for a robust earnings report to swoop in and save the day were beyond disappointed last night.

NVDA stock is getting demolished to the tune of 18% after missing third-quarter revenue estimates as well as fourth-quarter revenue guidance.

On the options trading front, calls were more popular than puts. Activity ended the day at 128% of the average daily volume, with 178,882 total contracts traded. About 56% of the trading came from call options alone.

The expected move heading into last night’s event was $16.61 which translates into an 8% gap. The 18.5% demolition transpiring overnight will destroy premium sellers resulting in a rare win for volatility buyers.

Alibaba (BABA)

Alibaba shares perked up Thursday with a breakout over the oft-watched 50-day moving average. Higher volume accompanied the surge, showing buyers were flocking to the stock like shoppers to its website during Sunday’s Singles day.

The Chinese online retail giant raked in over $30 billion in gross merchandise value during the shopping event marking an increase of nearly 27% over last year’s sales.

On the options trading front, volumes were equally split between calls and puts. Activity jumped to 148% of the average daily volume, with 316,674 total contracts traded.

Implied volatility held steady at 47% or the 57th percentile of its one-year range. Traders are now pricing in daily moves of 2.9%.

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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