Wednesday’s Vital Data: Micron Technology, Inc. (MU), Freeport-McMoRan Inc (FCX) and Citigroup Inc (C)
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U.S. stock futures are headed higher again this morning, as Wall Street looks toward the end of the two-day Federal Reserve meeting. No interest rate hike is expected, but investors will be watching the Fed’s statement on monetary policy for direction. Meanwhile, among those companies topping today’s flood of earnings reports are Ford Motor Company (NYSE:F) and Facebook Inc (NASDAQ:FB).
Heading into the open, futures on the Dow Jones Industrial Average are up 0.32%, S&P 500 futures have gained 0.18% and Nasdaq-100 futures have added 0.21%.
On the options front, volume returned to normal on Tuesday, with about 16.4 million calls and 13.5 million puts changing hands. Over on the CBOE, the single-session equity put/call volume ratio fell to 0.61, while the 10-day moving average dipped to 0.59 — its lowest point since December — as optimism begins to take a firm hold on speculative traders.
Diving into Tuesday’s options activity, Micron Technology, Inc. (NASDAQ:MU) was flooded with call options as investors bet on a rebound from yesterday’s sympathy drubbing from Seagate Technology PLC (NASDAQ:STX). Elsewhere, Freeport-McMoRan Inc (NYSE:FCX) call options also jumped, as traders focused on copper prices and Indonesia over poor quarterly results. Finally Citigroup Inc (NYSE:C) promised growth and to return at least $60 billion to shareholders in yesterday’s investor day.
Micron Technology, Inc. (MU)
Micron’s 5.6% drubbing on Tuesday was driven by lingering valuation fear. The spark that ignited the profit-taking selloff was Seagate Technology, which seriously bombed its quarterly earnings report. Unfortunately for Micron, it’s in an alliance with Seagate to make solid state drives (SSDs), and that was all the justification MU stock traders needed to sell, plunging the shares below support at $30.
MU options traders, on the other hand, saw the stock’s plunge as an opportunity to double down on their bullish bets. Volume topped 462,000 contracts on Tuesday, with calls gobbling up 70% of the day’s take.
What’s more, MU’s August put/call open interest ratio has retreated to a rather bullish reading of 0.39 as a result, with calls on the verge of tripling puts among front-month options. Right now, the bulls’ upside target is $34, where more than 61,000 calls are currently open in the August series.
Freeport-McMoRan Inc (FCX)
Freeport investors were just waiting for some good news, and, despite a second-quarter earnings miss, they got it yesterday. Copper prices jumped 2.2% yesterday on signs of stronger Chinese demand and supply-side concerns. But those supply-side concerns could also begin to ease, as Freeport is on the verge of ending its permit dispute with Indonesia.
“We are encouraged by recent progress in our active negotiations with the Indonesian government to resolve issues involving our contractual rights,” said Freeport-McMoRan Chief Executive Richard Adkerson.
FCX options traders were quick to jump on the news. More than 558,000 contracts traded on FCX stock, hitting a near-term high for the shares. What’s more, calls accounted for 60% of the day’s take — also a near-term high. But there’s still a lot of room for improvement on the sentiment front.
Currently, the August put/call OI ratio rests at a lofty perch of 1.45, as puts easily outnumber calls among front-month contracts. Furthermore, the bulk of these typically bearish positions lie at the deep-out-of-the-money $11 strike, totaling 48,000 contracts. An unwinding of this sentiment could help sustain a follow-through rally for FCX — if the Indonesian situation is straightened out.
Citigroup Inc (C)
Banking giant Citigroup held its first investor day conference since the 2008 crisis on Tuesday, and C stock traders loved what they heard. The company emphasized that its restructuring period was over, that it was focused on growth and that it was taking full advantage of its global network:
“Our global network is what’s driving our momentum,” Jamie Forese, the CEO of Citigroup’s Institutional Client Group, said during the presentation. “[The network] cannot be easily replicated by any of our peers in today’s market.”
Oh, and Citigroup plans on returning at least $60 billion to shareholders.
Citigroup options traders, who haven’t had many opportunities to chase rallied in the past nine years, loaded up on calls yesterday. Volume rose to 289,000 contracts, with calls snapping up a whopping 80% of the day’s take. As a result, the August put/call OI ratio was ushered lower to a perch at 0.52, with calls nearly doubling puts among near-term options. C traders currently lagging the rally, however, as peak August call OI totals 39,000 contracts at the in-the-money $65 strike.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
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