Tuesday’s Vital Data: Uber, Pfizer and Roku

Stock Market

U.S. stock futures are aiming for their third lower open in a row. Ahead of the bell, futures on the Dow Jones Industrial Average are down 0.19%, and S&P 500 futures are lower by 0.19%. Nasdaq-100 futures have lost 0.25%.

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In the options pits, put volume took the lead during yesterday’s stock drop. With overall volume settling near average levels, however, the session lacked signs of panic. By the closing bell, about 16.2 million calls and 16.9 million puts traded.

We did see an uptick in fear at the CBOE though. The single-session equity put/call volume ratio ramped to 0.78, nearing its high water mark for 2019. Meanwhile, the 10-day moving average ticked higher to 0.75.

Options activity was buzzing in Uber (NYSE:UBER), Pfizer (NYSE:PFE) and Roku (NASDAQ:ROKU) on Monday.

Let’s take a closer look:

options trading

options trading

Uber (UBER)

The bottom fell out from under Uber Monday, driving the ride-hailing giant to its lowest closing price ever at $37. Since reporting earnings last Thursday, UBER stock has lost 13.9% amid heavy volume. Its intraday low of $36.08 from the day after its IPO beckons and will soon be tested.

Uber’s quarterly results showed a massive $5.2 billion loss that has shareholders rushing for the exits. Deteriorating fundamentals and bearish technicals always form a toxic brew. I suspect the big earning miss will keep a lid on UBER for the remainder of the quarter. Couple that with a now extremely bearish price trend and spectators have little reason to buy.

The stock is dead money at best. Wait for an uptrend to emerge before even thinking about bullish plays.

Monday’s options trading reflected sellers’ dominance. Puts outpaced calls with activity growing to 234% of the average daily volume. In total, 119,490 contracts traded with puts accounting for 58% of the sum.

Implied volatility popped to 47%, halting Friday’s strong volatility crush after earnings.

Pfizer (PFE)

Pfizer stock’s descent accelerated Monday, pushing the pharmaceutical titan to a new 52-week low. The 2.6% whack saw heavy volume flashing again in a long line of distribution days. Last month’s earnings and the announcement that the company was spinning off its generic drug business with Mylan (NYSE:MYL) have rattled its stock price and created confusion over what impact the move will have on Pfizer’s dividend.

Since last year’s peak, PFE stock has lost 24% and is offering what could turn out to be a compelling long-term buying opportunity. Significant support looms at $34, and the stock is flashing some extreme oversold readings, suggesting the time for a rebound is nigh. Naked puts such as the Sep $34 strike offer a compelling high probability trade if you’re looking to bank on the bounce.

On the options trading front, traders favored puts on the day. Activity swelled to 189% of the average daily volume, with 122,018 total contracts traded. Puts accounted for 53% of the take.

The increased demand drove implied volatility higher on the day to 26%, placing it at the 54th percentile of its one-year range. Premiums are juiced, which makes selling puts all the more attractive.

Roku (ROKU)

Roku’s bid for world domination continued in earnest Monday with the video streaming service rocketing to a new record high of $136.55. By day’s end, the gains were pared, but ROKU stock still notched a new closing high. Buyers’ enthusiasm following last week’s better-than-expected earnings has been off the charts and reflects just how in love the Street has become for the stock.

In the short run, ROKU is flashing extreme overbought readings. The red-hot stock will likely cool over the coming days as profit-taking strikes to lock-in the recent good fortune. Given the powerful uptrend, however, you should view all weakness as a buying opportunity.

As far as options trading goes, calls led the way with activity rising to 159% of the average daily volume at 152,478 contracts. Calls added 54% to the session’s sum.

Increased demand halted the post-earnings volatility crush, pushing the metric back up to 62%. That lands it at the 28th percentile of its one-year range. Premiums are now pricing in daily moves of $5.27 or 3.9%.

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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