Tuesday’s Vital Data: Goldman Sachs, Bank of America and Citigroup

Stock Market

U.S. stock futures are trending higher this morning. Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.61%, and S&P 500 futures are higher by 0.34%. Nasdaq-100 futures have added 0.4%.

Yesterday’s narrow trading range lacked the pizzazz of Friday’s breakout. And that meant the action in the options pits was far more subdued. Calls outpaced puts by a modest margin even as overall volume receded to average levels. Specifically, about 17.6 million calls and 14 million puts changed hands on the session.

Meanwhile, over at the CBOE, the single-session equity put/call volume ratio popped to 0.57. The 10-day moving average slipped to 0.59.

Options traders focused on bank earnings yesterday. Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC) and Citigroup (NYSE:C) all rose to the top of the most-active options leader board.

Let’s take a closer look:

Goldman Sachs (GS)

The drumbeat of bank earnings continued on Monday with Goldman Sachs. For the first quarter, GS earned $5.71 per share on $8.81 billion in revenue. Wall Street analysts were forecasting earnings per share of $4.97, so the company crushed it on the bottom line. But the revenue numbers came in below the expected $9.04 billion.

On the dividend front, the banking behemoth did decide to raise its dividend by 6% to 85 cents a share. All together, traders were unimpressed and sent the stock skidding 3.8%.

GS stock entered the earnings announcement in need of help to finally catapult above the 200-day moving average. It has been submerged beneath the popular smoothing mechanism since last April. Unfortunately, yesterday’s selloff reaffirmed the 200-day’s dominance and plunged Goldman back into the trading range it has been locked in for three months.

Despite the drubbing, calls won the popularity contest. Activity swelled to 258% of the average daily volume, with 93,722 total contracts traded. Calls claimed 56% of the take.

Bank of America (BAC)

Traders awoke to a freshly released earnings report from Bank of America this morning. The company grew its earnings to $7.3 billion or 70 cents a share. Analysts were forecasting 66 cents a share. On the revenue side, the bank matched analyst estimates and raked in $23 billion.

The premarket trading for Bank of America is volatile, but at the time of this writing, the stock is down 1.6% premarket.

Like Goldman Sachs, BAC stock came into this morning’s report needing a boost to climb above overhead resistance. And that makes the rug-pull doubly mean. Until the stock can hurdle through $30 resistance, bulls should look elsewhere.

On the options trading front, calls outpaced puts by a mile. Activity grew to 161% of the average daily volume, with 461,381 total contracts traded. 67% of the total came from call options.

Options were pricing in a gap of 3.3% ahead of this morning’s number, so the 1.6% whack ahead of the bell falls well within expectations. Expect implied volatility to sink throughout the day as the earnings uncertainty gets removed.

Citigroup (C)

Share buybacks helped Citigroup earnings last quarter while revenue came in light. The bank earned $1.87 per share compared to the $1.80 expected by analysts. Revenue missed forecasts coming in at $18.58 billion versus $18.63 billion expected.

All in, the company allocated $4.06 billion toward share buybacks and $1.08 billion to dividend payouts.

C stock fell in early trading but rallied back to close near unchanged on the day. Its price chart is healthier than GS, due primarily to it already reclaiming the high side of its 200-day moving average. The rising 20-day and 50-day moving averages also help confirm that bulls maintain control of both the short- and intermediate-term trends.

On the options trading front, traders favored calls on the session. Total activity grew to 140% of the average daily volume, with 90,986 contracts traded. Calls contributed 57% to the session’s tally.

Implied volatility wasn’t all that high heading into earnings, but it’s falling afterward regardless. As it should! C stock yawned after the report, giving little reason for volatility expectations to stay aloft. Implied volatility now stands at 25%, or the 22nd percentile of its one-year range. Premiums are pricing in daily moves of $1.06, or 1.6%.

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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