U.S. stock futures are circling unchanged this morning as traders try to find their footing after Monday’s turbulent session. Yesterday morning’s swoon marked the largest selloff we’ve seen in over a month. Overhead resistance at 2,800 on the S&P 500 is living up to its reputation as a formidable ceiling.
Ahead of the bell, futures on the Dow Jones Industrial Average are flat and S&P 500 futures are higher by 0.07%. Nasdaq-100 futures have added 0.09%.
Monday’s scare lifted put volumes as traders took to the options market in search of downside protection. Calls still ruled the session, but the ratio of puts to calls narrowed. Specifically, about 19.1 million calls and 17.9 million puts changed hands on the day.
The jump in put demand propelled the CBOE single-session equity put/call volume ratio to a new one-month high at 0.67. Additionally, the 10-day moving average finally showed signs of life by rising to 0.60.
Let’s take a closer look:
Salesforce’s 2019 uptrend was put to the test after the close on Monday when the cloud software company reported earnings. For the fourth quarter, CRM earned 70 cents per share on revenue of $3.6 billion. Both metrics beat the Street’s expectations of 55 cents per share and $3.56 billion, respectively.
Unfortunately, traders found the company’s forward guidance wanting and pushed its share price down 3.7% amid heavy profit-taking. As harrowing as the down candle appears, spectators should take the descent in stride. CRM was up 20% year-to-date heading into the report and perched at record highs. So, some profit taking is more than justified. Multiple support levels loom below so provided buyers step up and defend their turf, CRM’s long-term trend will remain intact.
On the options trading front, calls dominated the session despite the drubbing. Activity rocketed to 599% of the average daily volume, with 202,758 total contracts traded. Calls accounted for 58% of the day’s take.
Curiously, implied volatility rallied suggesting there is now more uncertainty after earnings than before. At 40%, the reading now sits at the 49th percentile of its one-year range.
Exxon Mobil (XOM)
After early weakness, Exxon Mobil shares powered their way back into positive territory by day’s end. The captain of crude notched its highest close in three months at $80.31. With that, XOM stock is now up 17.8% year-to-date.
Energy stock bulls also scored a victory by pushing Exxon back above its 200-day moving average, signaling the continued improvement of its budding uptrend. I didn’t find much on the news front, so I’m chalking the groundswell in options trading as a byproduct of the volatile trading session.
Puts outpaced calls by a wide margin even as overall activity climbed to 246%. By day’s end, the total contracts traded stood at 107,437. 76% of the sum came from puts alone.
The uptick in demand pushed implied volatility up to 19% or the 17th percentile of its one-year range. Premiums are now pricing in daily moves of 97 cents, or 1.2%.
The darling of the Dow finally stumbled yesterday, suffering one of its largest down days of the year. Still, Boeing is up 34.2% for 2019 making it one of the hottest blue-chip stocks on the board.
If you’re seeking a cause for the pause, look no further than the technical posture of BA stock. The blistering pace it has set for 2019 is wholly unsustainable, and a pullback was inevitable. The silver lining is that further downside will bring low-risk entries to spectators reticent to chase Boeing into the sky.
Yesterday’s surge in options trading was enough to land BA atop the most-actives list. Total activity climbed to 132% of the average daily volume, with 106,993 total contracts traded. Calls added 59% to the day’s take.
Implied volatility is rising from the cellar, breathing new life into option premiums. At 27%, the reading now sits at the 24th percentile of its one-year range. Premiums are pricing in daily moves of $7.33 or 1.7%.
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.