Wednesday’s Vital Data: General Electric Company, Qualcomm and Advanced Micro Devices

U.S. stock futures are trading marginally higher this morning. Wall Street bulls appear to be running low on rally fuel after sending both the Nasdaq and the S&P 500 to three consecutive record high closes.

As for today’s drivers, economic data is in focus this morning. Second-quarter gross domestic product arrived ahead of the open. Also, July pending home sales data is slated for later this morning.

Heading into the open, futures on the Dow Jones Industrial Average have added a mere 0.02%. S&P 500 and Nasdaq-100 futures aren’t faring much better, with gains of 0.06% and 0.17%, respectively.

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In the options pits, volume drew back considerably in Tuesday’s trading. Roughly 15.9 million calls and 12.1 million puts changed hands on the session. On the CBOE, the single-session equity put/call volume ratio rose to 0.53. However, the 10-day moving average fell to a two-month low of 0.59. This may indicate that bullish sentiment is near a short-term peak.

Peak optimism was also noticeable in yesterday’s top ten most active options list due to dwindling daily call percentages. Advanced Micro Devices (NASDAQ:AMD) and General Electric (NYSE:GE) saw a marked increase in put activity despite a lack of headline news. Meanwhile, Qualcomm (NASDAQ:QCOM) call options volume surged after the company said it completed a portion of it’s accelerated share buyback program.

Let’s take a closer look:

Tuesday’s Vital Options Data: General Electric Company, Qualcomm and Advanced Micro Devices

General Electric (GE)

GE scored the biggest percentage of put volume during yesterday’s trading. While there was a distinct lack of headline news, GE has been in the dog house with investors for sometime due to its lack of turnaround progress. The latest concern appears to be the company’s power unit, which analysts say has more structural problems than GE wants to admit.

On the surface, it appeared that GE options traders loaded up on puts amid growing GE Power concerns. Volume rose to 277,000 contracts, nearly doubling GE’s daily average. Puts claimed 72% of that elevated activity.

However, a closer look at the activity via Trade-Alert.com indicates that profit taking may have been the real cause for the spike in put volume. Specifically, a block of nearly 141,000 GE Sep $13 puts (more than half yesterday’s volume) crossed late in the session at the bid price. Implied volatility at the strike declined and open interest fell, indicating that these contracts were sold to close.

With GE bouncing off it’s Aug. 15 lows and closing in on $13 once again, this may have been a trader locking in profits on a bearish put position on GE.

Qualcomm (QCOM)

QCOM stock was among the bigger winners in the tech sector yesterday. The shares rose roughly 2.6% on news that Qualcomm is buying back 76.2 million shares in a $1 billion tender offer. The move marks the first step in the company’s accelerated stock buyback plan that was approved after it’s buyout of  NXP Semiconductors NV (NASDAQ:NXPI) fell through.

QCOM options volume rose to 174,000 contracts as a result, with calls gobbling up 80% of the day’s take. No major block trades or single strike activity stood out on the session, indicating that the activity was likely not driven by institutional activity — which is odd considering that buybacks can drive arbitrage plays.

Looking out to September, the put/call open interest ratio comes in at 0.6. In other words, calls are on the verge of doubling puts for the front-month series. QCOM stock has seen a slow grind higher in optimism and call activity following the failure of the NXP deal.

Advanced Micro Devices (AMD)

AMD stock fell nearly 1% yesterday, extending a sharp sell off that began at about midday on Monday. The sell off is threatening key support at $25 for AMD, which had ridden a extreme wave of bullish sentiment in the prior week.

While the stock remains a solid long-term buy, it appears that AMD bulls will get better entry prices as this recent rally consolidates.  In premarket activity, AMD is down another 1.36% at last check.

Options traders even grew a bit cautious, as yesterday’s volume lacked AMD’s typical call option bias. Some 876,000 contracts traded on AMD yesterday, with calls only making up 59% of the overall activity.

Trade-Alert.com data reveals that the weekly Aug. 31 $26 and $25 call strikes were the most popular. The majority of $26 calls crossed at the bid, while the $25 calls traded nearer the ask.

The Aug. 31 $24 puts also received considerable attention, with most of this activity trading nearer the bid price, suggesting near-term premium selling in the hopes that AMD will hold above $24 through Friday’s close.

As of this writing, Joseph Hargett held no position in any of the aforementioned equities.

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