U.S. stock futures are trading cautiously higher this morning, as Wall Street struggles to deal with the flood of data and reports slate to arrive this week. First and foremost, political uncertainty is applying pressure, as investors wait on new information from the FBI in the Hillary Clinton email probe - just days ahead of next Tuesday's election. Also, the Federal Reserve is meeting this week to discuss the potential for an interest rate hike, key U.S. jobs data will arrive on Friday, and earnings season continues to roll on.
Against this exhausting backdrop, futures on the Dow Jones Industrial Average are up 0.05%, with S&P 500 futures gaining 0.11% and Nasdaq-100 futures adding 0.27%.
Friday's options activity was well above-average, with puts taking an unusual leadership role on the session. Specifically, 16.5 million calls and 18.9 million puts changed hands on Friday. Puts even made their presence known on the usually call-heavy CBOE, as the single-session equity put/call volume ratio surged to a three-month high of 0.78. The 10-day moving average was nudged higher to 0.63.
Driving Friday's option volume, Apple Inc. (NASDAQ: AAPL ) drew a flurry of options activity amid a week that saw earnings and the company's MacBook event fall short of expectations. Meanwhile, Amazon.com, Inc. (NASDAQ: AAPL ) also came up shy of quarterly expectations, leading options traders to respond with put volume. Finally, General Electric Company (NYSE: GE ) ended the week with speculation on a deal with Baker Hughes Incorporated (NYSE: BHI ) - a deal that was confirmed this morning.
Apple Inc. (AAPL)
Then the company's MacBook event fell flat.
There was little innovation to be seen, save incremental increases in performance and graphics and a touch bar that was largely overlooked by the financial media. As a result, Apple stock fell 3% on the week, though it could have been worse.
Even AAPL options traders felt the fatigue by Friday's session. Total volume came in at an above average 1.2 million contracts. However, call volume had tapered off to a mere 56% of the day's take - well below Apple's average daily call percentage in the 63%-65% region.
What's more, short-term activity on AAPL has turned downright bearish on the stock. Specifically, the weekly Nov. 4 series put/call open interest ratio has ballooned to a reading of 0.98, with puts and calls in near parity.
For perspective, AAPL's put/call OI ratio typically hovers in the 0.7 to 0.8 range, meaning that short-term traders this week are expecting more weak price action from Apple stock.
Amazon.com, Inc. (AMZN)
AMZN shares were also battered heading into the weekend, as traders reacted to the company's earnings miss. For the record , Amazon said it earned 52 cents per share on revenue of $32.7 billion, versus expectations for 77 cents per share on sales of $32.69 billion. AMZN plunged more than 5% following the report, taking out key psychological support at $800, and blowing through trendline support at its 50-day moving average.
Options traders reacted as you might suspect, with heavy put volume. Total volume for AMZN came in at 562,000 contracts on Friday, with puts snapping up 54% of the day's take.
Zeroing in on the weekly Nov. 4 series, peak put OI totals 1,800 contracts at the out-of-the-money $770 strike, with AMZN just seven-points from putting these contracts in the money. The next most popular strike this week is the in-the-money $780 put strike, where 1,500 contracts currently reside.
Look for AMZN options traders to potentially take profits early in today's trading and readjust accordingly, as the shares appear to be set for a post-selloff bounce heading into the open this morning.
General Electric Company (GE)
Finalizing a deal that was reported late in Friday's session, General Electric announced this morning that it has reached a deal to combine its oil-and-gas business with Baker Hughes. According to the terms , GE is adding a $7.4 billion special cash dividend to the deal, which will be 62.5% owned by General Electric and 37.5% owned by Baker Hughes shareholders.
The deal creates a $32 billion company that allows GE to take advantage of a rebound in the energy sector, without having to take the risk of buying Baker Hughes outright.
Early reports of the transaction had GE options traders out in force on Friday. Total volume surged to 431,000 contracts, with calls accounting for 59% of the day's take. GE options watchers can expect more volume today, as traders pile into arbitrage deals to take advantage of yet another GE spinoff.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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