U.S. stock futures were sharply lower Friday as sentiment on Wall Street deteriorated in anticipation of today's September nonfarm payrolls report. However, the U.S. created 156,000 jobs in September - far lower than the 176,000 jobs that were expected - and put a charge into the broader markets, as a December hike in interest rates now seems a little less likely.
Futures on the Dow Jones Industrial Average were off 0.25%, while S&P 500 and Nasdaq-100 futures were both in the red by 0.32%, but they were recovering immediately after the jobs figures were released.
Driving Thursday's options volume, Bank of America Corp. (NYSE: BAC ) options traders piled into calls ahead of this morning's September jobs report, many of which likely expected the data to force the Fed to raise rates later this year. Elsewhere, Tesla Motors Inc. (NASDAQ: TSLA ) was downgraded at Goldman Sachs due to its plan to purchase SolarCity Corp (NASDAQ: SCTY ), while Wal-Mart Stores, Inc. (NYSE: WMT ) dropped 3% after reports that it increased its stake in Chinese online retailer JD.Com Inc (ADR) (NASDAQ: JD ).
Bank of America Corp. (BAC)
BAC stock options traders are ready for a rate hike, at least judging by recently heavy call activity. Higher rates mean bigger returns for BofA's investment unit, and BAC stockholders have been waiting all year for the situation to turn higher.
But it doesn't look like they'll be getting it.
Overall, total volume on BAC jumped to roughly 1.1 million contracts on Thursday, with calls accounting for about 72% of the day's take. Turning to Trade-Alert.com data, we find that one particular options trader may not be as bullish at it would seem. Specifically, a block of 190,000 Nov. 18 series $16 strike calls crossed the tape yesterday afternoon at the bid price of 72 cents, or $72 per contract.
In other words, traders made a $13.68 million bet that BAC will hold below $16 through November expiration. BAC is down fractionally at $16.19 heading into the open; shares would need to pull back and stay there for this trade to reach maximum profit.
Tesla Motors Inc (TSLA)
TSLA stock dropped more than 3.5% on Thursday, and the shares are threatening to breach the psychologically important $200 level in premarket trading this morning. Driving the bearish activity is a downgrade from Goldman Sachs to "neutral" from "buy." Goldman also cut its price target to $185 from $240. The brokerage firm cited risks to Model 3 deliveries and the ill-advised acquisition of SolarCity as reasons for the move.
Options traders attempted to remain positive following TSLA's drop. Volume came in at 211,000 contracts, with calls managing to eke out 52% of the day's take. Looking out to the Oct. 21 series, calls still lay claim to peak OI at the $210 strike, where about 7,500 contracts are open. But put OI at the $200 strike is on the march higher, with about 4,700 contracts in residence. Another 4,500 puts are also open at the Oct. 21 $195 strike, hinting at put spread activity in the area.
Wal-Mart Stores, Inc. (WMT)
Normally stable WMT stock took a 3.2% haircut on Thursday. Investors sent the shares lower after a 13G filing revealed that Walmart increased its stake in Chinese online retailer JD.com by 10.8%. Clearly, Walmart stockholders don't see the investment as a solid long-term holding for WMT, which has tried to turn around its image of selling cheap goods from Chinese manufacturers.
Still, calls remained in focus for Walmart, despite yesterday's drop.
Total volume rose to 180,000 contracts, with calls snapping up 62% of the day's take. Furthermore, the out-of-the-money Oct. $72.50 call strike is the center of attention for most of WMT's near-term call OI, sporting nearly 20,000 contracts. The next most popular call strike is the deeper out-of-the-money $75 strike, where about 18,000 contracts are currently open. By contrast, peak put OI for the series totals 7,300 contracts at the now in-the-money $70 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
More From InvestorPlace
- 5 Top Stocks to Buy for October
- 10 Biotech Stocks to Put on Your Radar This Quarter
- The 10 Best ETFs on the Planet
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.