Monday’s Vital Data: Microsoft, Boeing and Netflix
U.S. stock futures are pointing to a higher open this morning as traders gear up for a slew of earnings reports. Over 25% of the S&P 500 are scheduled to post their latest quarter of earnings data this week.
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Heading into the open, futures on the Dow Jones Industrial Average are up 0.21%, and S&P 500 futures are higher by 0.29%. Nasdaq-100 futures have added 0.45%.
In the options pits, calls led the charge on Friday despite the weakness plaguing stocks after a strong open. Overall volume swelled well north of recent average volume levels with approximately 22.8 million calls and 18.5 million puts changing hands on the session.
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Meanwhile, over at the CBOE, the action mirrored Thursday’s movement with the single-session equity put/call volume ratio holding steady at 0.60. The 10-day moving average did likewise, treading water at 0.60.
Options activity was rockin’ in Boeing (NYSE:BA), Microsoft (NASDAQ:MSFT) and Netflix (NASDAQ:NFLX) on Friday.
Let’s take a closer look:
Microsoft (MSFT)
Microsoft was one of the big reasons behind Friday’s bullish open for the broad market. But, what Mister Softee giveth, he taketh away. A strong sell-the-news reaction saw MSFT stock’s early morning gains all but disappear by the closing bell. Said selling set the tone for the rest of the market, which melted by day’s end.
Bearish reversal notwithstanding, Microsoft crushed its numbers for the quarter. The software sultan sailed past estimates on the top and bottom line, solidifying its dominance as the world’s most valuable company with a market cap of $1.05 trillion.
Calls led the charge on the options trading front during the post-earnings celebration. Total activity rocketed to 366% of the average daily volume, with 648,481 contracts traded; 69% of the trading came from call options alone.
With the stock sinking back toward unchanged on the day, implied volatility fell dramatically on the day. It now rests at 21% or the 12th percentile of its one-year range. Premiums are pricing in daily moves of $1.84 or 1.3%, so set your expectations accordingly.
Boeing (BA)
Investors are finally able to put some numbers on the uncertainty surrounding Boeing’s 737 MAX debacle. In a statement last Thursday, the company reported:
“Boeing will record an after-tax charge of $4.9 billion ($8.74 per share) in connection with an estimate of potential concessions and other considerations to customers for disruptions related to the 737 MAX grounding and associated delivery delays. This charge will result in a $5.6 billion reduction of revenue and pre-tax earnings in the quarter.”
Despite the hefty price tag, traders celebrated the news, sending BA stock 4.5% higher on heavy volume Friday. The positive reaction to such a negative headline shows just how much investors value certainty. They now have specific numbers to wrap their head around when assessing the bottom-line impact of the 737 MAX debacle.
On the options trading front, calls outpaced puts throughout the session. Activity climbed to 284% of the average daily volume, with 225,456 total contracts traded. Calls accounted for 60% of the take.
Implied volatility slipped lower to 26% or the 22nd percentile of its one-year range. That suggests traders aren’t expecting much excitement out of the earnings announcement looming Wednesday morning.
Netflix (NFLX)
The post-earnings fallout for Netflix continued on Friday with another sizable down day. NFLX stock fell 3.4% on heavy volume. Several significant support zones shattered last week placing the streaming media giant on precarious footing.
Friday’s breach of $320 appears particularly ominous because it was the only floor standing in the way of a price void. If filled, we could see NFLX return to this year’s low of $257.
On the options trading front, puts led the charge. Activity grew to 257% of the average daily volume, with 114,951 total contracts traded. Puts accounted for 54% of the session’s sum.
The post-earnings volatility crush continued on Friday, driving the reading down to 31% or the 19th percentile of its one-year range. Premiums are now only pricing in daily moves of $6.24 or 2%.
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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