U.S. stock futures are circling unchanged this morning with many traders eyeing the 200-day moving average overhead as a logical zone for the rally to pause.
Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.08% and S&P 500 futures are higher by 0.05%. Nasdaq-100 futures have added 0.23%.
In the options pits, call volume surged yesterday, helping to drive overall volume back to average levels. Specifically, about 20 million calls and 15.8 million puts changed hands on the session.
The jump in calls made an impact at the CBOE, where the single-session equity put/call volume ratio fell to 0.56. Meanwhile, the 10-day moving average ticked lower to 0.62.
Earnings announcements continue to be the catalyst for which companies land atop the most-active options list. Disney (NYSE:DIS) options were hot ahead of last night’s earnings release. General Motors (NYSE:GM) and Snap (NASDAQ:SNAP) are both rallying premarket after rousing reports of their own.
Let’s take a closer look:
The tide of earnings beats rolled on yesterday with Walt Disney finally steeping onto the stage. The entertainment king reported earnings of $1.84 per share on revenue of $15.3 billion. Wall Street was expecting $1.55 in earnings on revenue of $15.05 billion.
Investors are rewarding DIS stock with gains in the premarket session, but they aren’t much. At the time of this writing, Disney shares were up 0.57%. That said, the technical posture for the stock has improved notably alongside the six-week market recovery. It now sits above all major moving averages and is well positioned to revisit last year’s highs near $120.
On the options trading front, traders favored call options on the session. Total activity swelled to 431% of the average daily volume, with 189,684 total contracts traded. Calls accounted for 55% of the day’s take.
The expected move for earnings was $2.41, or 2.1%, so the after-hours move is thus far well inside of expectations. Implied volatility should dive on the day, making this an easy win for premium sellers.
General Motors (GM)
Shares of General Motors are rallying 3.3% premarket after topping the Street’s earnings estimates. The automaker reported earnings of $1.43 on revenue of $38.4 billion. Analysts were expecting earnings of $1.22 per share on $36.4 billion in revenue.
The price action for GM stock has been a choppy mess for the past year, but strides have been made. And this morning’s gap is only adding to the improvements. For example, GM shares now sit atop a rising 20-day and 50-day moving averages, confirming that buyers have control of the short and intermediate-term trends.
Consider $45 the next upside target for the stock.
On the options trading front, traders came after calls with a vengeance. Activity swelled to 246% of the average daily volume, with 125,037 total contracts traded. 56% of the trading came from call options.
Ahead of this morning’s report, options were pricing in a gap of $1.40, or 3.6%, so the premarket movement is right in line with expectations.
Snap finally snapped (sorry) its streak of negative reactions to quarterly earnings. After dazzling the Street with a much-needed top and bottom line beat, SNAP stock rocketed higher. Currently, it’s up 23.4% in premarket trading.
The struggling social media company delivered a loss of 4 cents per share on revenue of $389.82 million. Analysts were expecting a loss of 8 cents per share.
As exciting as a 20%-plus pop is, the dramatic descent in SNAP has been so relentless over the past year that we’ll need to see much more upside before its long-term trend is officially reversed. Nonetheless, shareholders should chalk this up as a rare win and one that could set a bullish tone for SNAP’s stock price in the quarter to come.
On the options trading front, calls outpaced puts by a wide margin. Activity climbed to 336% of the average daily volume, with 217,544 total contracts traded. 63% of the trading came from call options alone.
Traders were pricing in a 99-cent move, or 13.9%, for the earnings gap. So, the 21% jump surpassed expectations and will bring profits to traders holding long volatility plays into the event, like straddles or strangles.
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.