U.S. stock futures are circling unchanged after yesterday’s impressive rally to begin Q2.
Heading into the open, futures on the Dow Jones Industrial Average are down 0.01% and S&P 500 futures are higher by 0.09%. Nasdaq-100 futures have added 0.11%.
As you might expect on a day where bulls dominate, call volume reigned supreme in the options pits. Specifically, about 18.6 million calls and 14 million puts changed hands on the session.
The optimism made waves at the CBOE as well, with the single-session equity put/call volume ratio continuing its descent. The reading inched lower to 0.61 — a two-week low. Meanwhile, the 10-day moving average held its ground at 0.63.
Let’s take a closer look:
The multiyear deterioration in AT&T stock could finally be over — at least, if recent technical developments are to be trusted. The once-unhealthy telecom giant scored a rousing breakout above two crucial resistance levels yesterday. First was the horizontal ceiling at $31.40 that kept a lid on T shares for all of Q1. Second was the oft-watched and usually important 200-day moving average which the stock has been submerged beneath since last March.
With further rate hikes on hold, likely indefinitely, and Wall Street anticipating the Fed’s next move being a rate cut, dividend-paying stocks are once again in vogue. Despite its recent recovery, AT&T still boasts a mouth-watering dividend of 6.4%.
The breakout spurred demand for call options. Activity rocketed to 179% of the average daily volume, with 136,823 total contracts traded. Calls contributed 63% of the total.
Implied volatility drifted sideways at 20%. It remains at the 19th percentile of its one-year range. Premiums are pricing in daily moves of 39 cents, or 1.2%.
AT&T wasn’t the only high dividend payer caught up in Monday’s rally. Ford, which carries a juicy 6.7% yield, popped 2.28%. The run carried F stock directly into overhead resistance at $9. Traders will find out today if this upswing can succeed where so many of its predecessors failed.
Even if the ceiling is finally felled, the 200-day moving average is cruising lower and sure to come into play at $9.30. So if Ford really wants to impress spectators, it needs to take out both zones.
On the options trading front, calls outpaced puts by a large margin. Activity grew to 174% of the average daily volume, with 117,864 total contracts traded. 71% of the trading came from call options alone.
Implied volatility edged higher on the day to 33%, placing it at the 33rd percentile of its one-year range. Premiums are pricing in 19-cent daily moves, which translates into 2.1%.
Bank of America (BAC)
The fickle nature of news and narratives was on full display Monday. When inverted yield curve fears recently gripped the Street, bank stocks were anathema, and BAC shares were slammed. But on Monday, what was loathed became loved, and BAC rocketed 3.4% higher.
Before you go piling in, however, realize that the stock chart remains in hot mess territory. It has returned to the middle of its multimonth range, and the crisscrossing moving averages reveal indecision across time frames. Until BAC stock can successfully break above the $30 resistance zone, I suggest steering clear.
Of course, the messy chart didn’t prevent speculators from going gaga over call options. Three calls traded every one put while activity ramped to 169% of the average daily volume, with 415,406 total contracts traded.
Implied volatility didn’t budge and remained at 25%, or the 29th percentile of its one-year range. Premiums are baking in daily moves of 46 cents or 1.6%.
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.