Tuesday’s Vital Data: Twitter, Netflix and Tesla

U.S. stock futures are trading higher in early morning trading on the heels of robust earnings from two Dow Jones Industrial Average components. Coca-Cola (NYSE:KO) and United Technologies (NYSE:UTX) released impressive numbers and are trading up 2.5% and 3.4%, respectively.

Against this backdrop, futures on the Dow Jones are up 0.17%, and S&P 500 futures are higher by 0.06%. Nasdaq-100 futures have added 0.08%.

In the options pits, yesterday’s slow burn took a bite out of trading volumes. Calls outpaced puts on the session, but both fell below average volume levels. Specifically, about 16.2 million calls and 12.2 million puts changed hands.

The action at the CBOE was equally uninspiring and left little to chatter about. The single-session equity put/call volume ratio slipped to 0.60 landing it in the dead center of its 2019 trading range. It also sits right on top of the 10-day moving average, which also sits at 0.60.

There were three hot stocks attracting options traders: Twitter (NYSE:TWTR), Netflix (NASDAQ:NFLX) and Tesla (NASDAQ:TSLA)

Let’s take a closer look:

Twitter (TWTR)

Twitter reported earnings this morning and investors are cheering its performance. For the first quarter, TWTR earned 37 cents per share on $787 million of revenue. Analysts were expecting earnings of 15 cents on 776 million, so both metrics surpassed forecasts.

TWTR stock is jumping 7% premarket to $36.70. How traders respond to the gap open will be an important tell. Long-term resistance near $37 has sat atop the stock for almost a year now. It has proved impenetrable despite numerous attempts. If buyers can finally break through it, the technical picture of TWTR will suddenly look a lot more bullish.

Until then, resist the urge to chase this morning’s jump.

On the options trading front, total volumes surged ahead of this morning’s release with calls leading the way. Activity swelled to 335% of the average daily volume, with 272,240 contracts traded. Calls claimed 56% of the sum.

The expected move heading into earnings was $3.14 or 9.1%, so this morning’s 7% pop falls within what premiums were pricing in. That means option sellers should come out slight winners at the open.

Netflix (NFLX)

Yesterday’s 4.7% rally in NFLX stock has bulls frothing at the mouth. And I don’t blame them. The high volume ramp is pushing the streaming media giant directly into overhead resistance and threatening a breakout. Given the months of consolidation NFLX has been stuck in, this breakout has been a long time coming and has millions of eyeballs watching its every move.

A breach of the $380 ceiling should see the stock up for a run toward its record highs at $423.

On the options trading front, traders chased calls all day long. Activity climbed to 134% of the average daily volume, with 240,461 total contracts traded. Calls accounted for 58% of the day’s take.

Implied volatility, fresh off its post-earnings volatility crush, rallied back on the day to finish at 32%. That places it at the 20th percentile of its one-year range and suggests premiums are cheap right now. The expected daily move is $7.56 or 2%.

Tesla (TSLA)

Tesla shares continue to struggle in anticipation of Wednesday night’s earnings report. With Monday’s 3.8% drop, Elon Musk’s flagship has now lost 21% year-to-date. The losses are continuing premarket with the stock down another 1.6%.

The price action since the turn of the year has been consistently bearish. Both the 50-day and 20-day moving averages have been sliding lower and acting as resistance on the way down. But with significant support now looming closely at $250, TSLA stock is entering its quarterly report at an exciting juncture.

On the options trading front, put options were the hot ticket for the day. Total activity ticked slightly higher to 112% of the average daily volume, with 247,073 contracts traded. 59% of the trading came from put options alone.

Heading into earnings, implied volatility is at 78% or the 55th percentile of its one-year range. Premiums are baking in an $18.28 gap or 7%.

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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