Stock Market

U.S. stock futures are crawling higher this morning to continue yesterday’s snap-back rally. Sellers’ inability to score a second down day in a row after Tuesday’s drop reveals the undying bid beneath the surface.

Heading into the open, futures on the Dow Jones Industrial Average are up 0.13%, and S&P 500 futures are higher by 0.1%. Nasdaq-100 futures have added 0.04%.

The bulls’ return generated predictable results in the options pits. Put activity sunk while calls held steady. Specifically, about 14.4 million calls and 12 million puts changed hands on the session.

The CBOE single-session equity put/call volume ratio ticked higher but remains in the middle of its 2019 range. Remember, we’re looking for extremes in indicators like this to signal buying or selling exhaustion. When it fiddles in the middle (like now), there isn’t much to talk about. The reading ended the day at 0.62, which lands it right on top of the 10-day moving average.

Option traders flocked to the following stocks. Bed Bath and Beyond (NASDAQ:BBBY) was bubbly ahead of last night’s earnings report. Buyers will awake disappointed. Next, Lyft (NASDAQ:LYFT) shares are driving into the abyss. Perhaps there’s someone in need of a ride down there. Finally, the uptrend in Nvidia (NASDAQ:NVDA) notched a new multimonth high.

Let’s take a closer look:

Bed Bath and Beyond (BBBY)

Struggling retailer, Bed Bath and Beyond stepped up to the earnings plate last night. And yesterday’s 5% high-volume rally might lead you to believe that somebody knew something ahead of the number.

They didn’t.

BBBY stock is sinking like a stone premarket to the tune of 12%. So much for the optimism. For their fiscal fourth quarter, BBBY earned $1.20 per share on revenue of $3.31 billion. The Street was looking for $1.11 in earnings on $3.33 billion. On a bright note, the company announced an increase to its quarterly dividend from 16 cents to 17 cents.

Perhaps the sell the news reaction was warranted. After all, BBBY had gained 58% in the last quarter alone. As long as support near $16 to $16.50 doesn’t fail, the overall 2019 uptrend will remain intact.

On the options trading front, puts were the hot ticket despite Wednesday’s surge. Activity ramped to 501% of the average daily volume, with 109,129 total contracts traded, and 64% of the trading came from put options alone.

Options were pricing in a $2.27 or 11.7% move on earnings, so this morning’s down gap is right in line with expectations. Expect implied volatility to experience the customary crush once the market opens.

Lyft (LYFT)

Lyft burst onto the public scene on March 29, and listed options contracts are finally here. The San Francisco based transportation network company has seen very little success since its debut. In fact, with Wednesday’s 11% whack, LYFT stock is now down 33% from its peak.

As with any new stock in its infancy, any trades are highly speculative at this point. There just isn’t enough price data to build trades around yet. That said, the action since its IPO has been extremely bearish, so sellers hold the upper hand for now.

On the options trading front, traders came after calls with a vengeance. Total activity popped to 259% of the average daily volume, with 147,533 total contracts traded. Admittedly, calculating the average of anything right now is kind of a joke with such a small data set. As you might expect with such a dramatic down day, puts contributed the most to the day’s tally at 54%.

NVDA

Nvidia is back from the dead. 2019 has been a turnaround year for the stock, with its gains already climbing 44%. Wednesday’s ramp carried NVDA stock to a fresh five-month high bringing it oh-so-close to filling last November’s dreadful earnings gap.

The stock has a date with the 200-day moving average at $203, so consider that the next upside target. If you’re a bear seeking its next meal, I suggest moving along. The technicals for NVDA remain quite bullish.

News and volume were light yesterday, but it still made the top 10 active options list!

On the options trading front, calls outpaced puts. Activity finished at 85% of the average daily volume, with 162,642 total contracts traded. Calls accounted for 63% of the session’s tally.

Implied volatility crept higher to 46%, placing it at the 40th percentile of its one-year range. Premiums are now pricing in daily moves of $5.51, or 2.9%.

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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