Friday’s Vital Data: General Electric, United States Steel and Facebook

Stock Market

U.S. stock futures are trading slightly higher after the nonfarm payrolls report came in much better than expected. The economy saw payrolls jump by 304,000, which was much higher than the expected 170,000 gain.

Heading into the open, futures on the Dow Jones Industrial Average are up 0.24% and S&P 500 futures are higher by 0.06%. Nasdaq-100 futures remained weighed down by Amazon (NASDAQ:AMZN) earnings and are off 0.42%.

In the options pits, the post-Federal Resereve news euphoria continued, with calls dominating the day. Specifically, about 24.8 million calls and 18.9 million puts changed hands on the session.

Call popularity was felt at the CBOE as well. The single-session equity put/call volume ratio plunged to 0.53 and is fast approaching its lowest readings for 2019. Meanwhile, the 10-day moving average slipped to a four-month low at 0.61.

Options activity was once again driven by earnings reports on Thursday. General Electric (NYSE:GE) scored its best one-day gain in a decade. United States Steel (NYSE:X) rallied back from an immediate post-earnings stumble. Finally, Facebook (NASDAQ:FB) was flooded with activity after a rousing earnings beat.

Let’s take a closer look:

General Electric (GE)

Shareholders worried that General Electric’s earnings release would upend the stock’s budding recovery breathed a sigh of relief yesterday.  Though the struggling company missed earnings estimates, its revenue beat was enough to send the shares 11.65% higher. The surge was GE stock’s best one-day gain in a decade.

The company reported 17 cents a share on revenue of $33.28 billion. Analysts were expecting earnings of 22 cents on $32.23 billion.

On the options trading front, calls outpaced puts by a slim margin. Total activity swelled to 419% of the average daily volume, with 1,310,672 total contracts traded. Calls added 53% to the day’s tally.

Ahead of the report, the expected move priced into option premiums was 85 cents. So the $1.06 pop brought profits to traders holding long volatility positions into the event. With the post-earnings crush, implied volatility has fallen to 47.5%, placing it at the 40th percentile of its one-year range.

United States Steel (X)

United States Steel bulls proved their worth yesterday after the stock gapped lower following weaker-than-expected earnings. Though X stock started down 7.7%, by the closing bell buyers had buoyed the stock to finish higher by 1.44%.

Metal and mining stocks suffered tremendously in the fourth quarter, but have been one of the best industry groups during January’s market snap-back. Yesterday’s high-volume bullish reversal warrants continued optimism for X stock in the short-term.

On the options trading front, calls ruled the roost. Total activity grew to 355% of the average daily volume, with 136,312 total contracts traded. 60% of the day’s take came from the call side.

With the stock rallying back to close near unchanged, implied volatility got crushed. The drop to 46% now places it at the 27th percentile of its one-year range. Premiums are pricing in daily moves of 65 cents, or 2.9%

Facebook (FB)

Facebook shares came roaring back after posting solid earnings results. The social media titan earned $2.38 per share on revenue of $16.91 billion. Both measures bested the Street’s estimates of $2.19 earnings on $16.39 billion in revenue.

Though the intraday gains were pared by day’s end, FB stock still finished 10.8% higher amid heavy volume. With the shares running headlong into the 200-day moving average, some backing-and-filling may be in order. But make no mistake, the trend is now higher, and future weakness should be viewed as buyable.

On the options trading front, traders came after calls with a vengeance. Activity ballooned to 306% of the average daily volume, with 871,195 total contracts traded. 65% of the trading came from call options alone.

The 10.8% rip blew expectations out of the water. Ahead of earnings, the expected move was only 6.3%, so chalk this up as a big win for volatility buyers. Implied volatility now sits at 30%, or the 37th percentile of its one-year range. Premiums are pricing in daily moves of $3.12, or 1.9%.

As of this writing, Tyler Craig didn’t hold a position in any of the aforementioned securities. Check out his recently released Bear Market Survival Guide to learn how to defend your portfolio against market volatility.

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