Falling oil prices and a poor ISM outlook weighed heavily on Wall Street on Monday. The major market indices posted losses across the board after eking out a gain last week, with the S&P 500 dipping back below 2,100 on a loss of 0.28%.
The renewed selling pressure is breeding caution among options traders. On Monday, the CBOE’s single-session equity put/call volume ratio extended its recent gains to arrive at 0.73. The 10-day moving average rose to 0.68.
In equity news, Twitter Inc (NYSE:TWTR) call activity spiked despite fears of slowing user growth pushed the stock roughly 5.7% lower. Put volume edged out call activity for Walt Disney Co (NYSE:DIS) ahead of tonight’s second-quarter earnings report, and Markwest Energy Partners LP (NYSE:MWE) was flooded with calls ahead of the stock’s ex-dividend and tomorrow’s quarterly earnings report.
Twitter Inc (TWTR)
It’s been nearly a week since Twitter disappointed investors with its lackluster second-quarter report, and Wall Street is still talking about slowing user growth at the microblogging firm. Active users only rose by 15% year-over-year, or just 3% above first-quarter numbers — the weakest growth yet for the firm. Furthermore, there is a growing chorus claiming that Twitter may not be able to bounce back this time around.
Option volume has remained high throughout the past week, with calls appearing to gain traction. On Monday, 358,593 contracts traded on TWTR stock, with calls accounting for 65% of the day’s take.
While call activity on a struggling stock may seem counter productive or hopeful, remember that calls a can be used to hedge short positions. Twitter watchers will want to keep a close eye on the next round of short-interest data to see if this rise in call activity translates into a similar rise in short interest.
Walt Disney Co (DIS)
DIS was among the few stocks that found positive purchase on Monday, with the shares rising nearly 1% on the day. With the success of Disney’s Marvel movie franchise, DIS stock has become quite popular in the past two years, which is no surprise with DIS up more than double since the start of 2013.
The company is slated to release its second-quarter earnings report after the close of trading this afternoon, and analysts are expecting what could be Disney’s strongest quarter ever. Currently, Wall Street is targeting a profit of $1.39 on revenue of $13.22 billion. Disney has a history of topping the consensus, and the company’s whisper number of $1.47 per share reflects this.
Options activity was brisk on DIS on Monday, with 116,337 contracts trading on the stock. Put volume edged out calls on the day, claiming 51% of the session’s total volume. Looking at weekly Aug 7 series open interest, peak OI totals 3,167 contracts at the in-the-money $120 strike, with both the $121 and $125 strikes sport OI of more than 2,500 contracts each.
Markwest Energy Partners LP (MWE)
Markwest is offering up a two-for for stockholders this week. MWE will begin trading ex-dividend today, with shareholders of record eligible for a dividend payout of 92 cents per share on August 14. Additionally, the company is slated to report second-quarter earnings ahead of the open tomorrow morning. The consensus is targeting a profit of 19 cents per share on revenue of $575.1 million.
Volume on MWE stock came in at record levels on Monday, with 341,963 contracts changing hands. Furthermore, nearly all of this activity traded on the call side, reflecting considerable dividend-capture plays ahead of today’s ex-div date.
As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.
