U.S. stock futures are trading higher this morning, which is a bit surprising. President Donald Trump cancelled the U.S.’s summit with North Korea yesterday. What’s surprising is that North Korea kept its cool and did not ratchet up rhetoric in response.
As a result, Wall Street has turned its focus to a planned speech from Federal Reserve Chairman Jerome Powell and updates on U.S. durable goods orders and consumer sentiment.
Against this backdrop, futures on the Dow Jones Industrial Average are up 0.17%. S&P 500 futures have added 0.23% and Nasdaq-100 futures have gained 0.03%.
In options activity, volume remained below average on Thursday, and is showing signs that the summer slowdown is starting to creep in. Overall, about 16.1 million calls and 12.9 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio came in at 0.64. The 10-day moving average ticked higher to 0.60.
Options traders still can’t take their eyes off Micron Technology, Inc. (NASDAQ:MU), as the stock hit a new closing high following Monday’s analyst day. Meanwhile, dovish minutes from the most recent Federal Market meeting pressured options activity on Bank of America Corp (NYSE:BAC). Finally, Petróleo Brasileiro S.A. Petrobras (NYSE:PBR) was inundated with options volume after cutting diesel fuel prices in Brazil.
Let’s take a closer look:
Micron Technology, Inc. (MU)
At its analyst day event on Monday, Micron lifted third-quarter guidance and announced a $10 billion stock buyback plan. The news goosed MU stock, sending the shares careening toward a fresh all-time closing high on Thursday.
Bullish sentiment continues to mount as Micron inches toward next month’s quarterly earnings report. Micron reports on June 20, with analysts expecting earnings of $2.84 per share on revenue of $7.46 billion.
Options traders are already gearing up. Volume yesterday continued to rise, topping out at nearly 497,000 contracts, or nearly double Micron’s daily average. Calls claimed a whopping 71% of the day’s take.
Weekly June 22 options have been a flurry of activity since Micron officially set its earnings date. Sentiment is extremely bullish, with the weekly June put/call open interest ratio arriving at 0.27. In other words, calls more than triple puts for options most affected by Micron’s quarterly report.
Bank of America Corp (BAC)
While the likelihood of a June interest rate hike now stands at 90%, the latest Fed minutes painted a dovish picture of the central bank. Officials said they favored a more measured approach to lifting rates, shifting from the more aggressive tone set earlier in the year. The result has been pressure on financial concerns like Bank of America.
BAC options traders have taken the pressure in stride. After a round of profit taking last week, call open interest is once again accumulating in the June series. Volume yesterday rose to 377,000 contracts, with calls making up 69% of the day’s take.
Unlike last week, however, the June series has seen call adds instead of a decline in OI. The June put/call OI ratio has fallen in the past week from 0.89 to today’s perch at 0.87. In other words, traders now appear to be betting on a rebound for BAC, a move that seems likely given the stock’s pullback to support at $30.
Petróleo Brasileiro S.A. Petrobras (PBR)
Oil prices have taken a hit this week, dropping more than $1 to trade below $71 per barrel. The decline sent diesel prices lower, negatively impacting Petrobras.
However, the company also voluntarily cut diesel prices by 10% in Brazil to appease an ongoing strike by truckers in the country protesting high fuel prices.
The cut reminded investors of Petrobras’ history of political influence and corruption, sending PBR stock down more than 15% yesterday. Options traders also reacted harshly.
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