Thursday’s Vital Data: General Electric, General Motors and Roku
U.S. stock futures are trying to find their footing this morning after sellers clinched their third straight victory Wednesday. The three-day losing streak was particularly brutal in small-caps, with the Russell 2000 falling nearly 2% yesterday.
In early morning trading, futures on the Dow Jones Industrial Average are down 0.08% and S&P 500 futures are lower by 0.03%. Nasdaq-100 futures are around even.
In the options pits, the market’s downdraft lit a fire under put demand, helping to drive overall volume to above-average levels. Specifically, about 19.3 million calls and 18.4 million puts changed hands on the session.
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The uptick in put traffic made waves at the CBOE, where the single-session equity put/call volume ratio rose to 0.70 — a one-month high. The 10-day moving average also jumped to a one-month high at 0.63.
Here were three stocks capturing the attention of options traders. General Electric (NYSE:GE) crashed almost 8% after negative comments from its CEO on 2019 cash flow concerns. General Motors (NYSE:GM) was in focus with traders looking to control the stock ahead of Thursday’s ex-dividend date. Finally, Roku (NASDAQ:ROKU) ripped 4.5% as momentum traders continued their 2019 bid to return the company to last year’s record high.
Let’s take a closer look:
General Motors (GM)
This week’s market retreat is spoiling General Motors’ recovery attempts. The carmaker has fallen in five of the last seven trading sessions. Though the intermediate-term uptrend remains intact, the short-term uptrend is losing steam. A break below $38 support would officially reverse its trajectory.
News was nonexistent yesterday, so the cause for GM’s appearance atop the most-actives list was due to the typical shenanigans surrounding its quarterly dividend payout. Namely, traders gobbled up call options so they could control the stock ahead of the ex-dividend date. That way they’ll have rights to the 38 cent payout.
Currently, the dividend yield sits at 3.9% which is nearly double that of the S&P 500.
Calls dominated the trading session outpacing puts by a monster margin. Activity rocketed to 388% of the average daily volume, with 168,558 total contracts traded. 90% of the sum came from the call side.
Implied volatility lifted slightly on the day, but is still puttering at the lower end of its one-year range. At 26%, it sits at the 24th percentile of its one-year range. The expected daily move is 64 cents, or 1.7%.
Roku (ROKU)
Momentum traders heart Roku this year. Ever since the company reported improvement in a few core fundamental metrics in early January, the streaming device maker has been on fire. The market gods poured gasoline on the blaze during last month’s earnings report, and the stock has been running ever since.
Relative strength was on full display yesterday with ROKU stock rallying 4.4% despite the broader market’s slide. With a retest of Roku’s all-time high at $77.57 around the corner, I see zero technical reasons to be a bear here.
With the stock being a lone standout amid a sea of red, traders flocked to the equity and its derivatives. Options activity jumped to 188% of the average daily volume with 105,646 contracts traded. Calls dominated the day accounting for 69% of the total.
Roku’s bullish momentum has driven implied volatility into the basement at 58%. It sits at the 26th percentile of its one-year range. Currently, premiums are baking in daily moves of $2.61, or 3.6%.
General Electric (GE)
The budding recovery in General Electric is no more. Since opening almost 14% higher last Monday amid news that the company was selling its biopharma business to Danaher Corp (NYSE:DHR), GE shares have been smashed. The initial cause for the rapid reversal was likely traders ringing the register in a sell-the-news type reaction. Additionally, the 200-day moving average looming overhead brought sellers to the yard.
Yesterday, the plunge intensified with a high-volume 8% drop following remarks by CEO Larry Culp during his participation in the J.P. Morgan Aviation, Transportation & Industrials Conference in New York. He stated that the company is expecting major headwinds to cash flow for 2019.
Jittery investors took to the options market to express their displeasure. By day’s end, total activity had grown to 211% of the average daily volume, with 799,964 total contracts traded. 64% of the trading came from put options alone.
The uptick in demand is inflating option prices once more. Implied volatility rallied to 62%, placing it at the 65th percentile of its one-year range. Premiums are now pricing in daily moves of 35 cents, or 3.8%.
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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