Tuesday’s Vital Data: Beyond Meat, Salesforce and Netflix

Stock Market

U.S. stock futures are trading higher this morning as equity indexes try to extend their winning streak to seven trading sessions.

Ahead of the bell, futures on the Dow Jones Industrial Average are up 0.58%, and S&P 500 futures are higher by 0.60%. Nasdaq-100 futures have added 0.90%.

In the options pits, call domination continues to be the story. Overall volumes ended the session slightly above average levels with about 18.4 million calls and 15.3 million puts changing hands.

Meanwhile, over at the CBOE, the single-session equity put/call volume ratio was unable to match Monday’s extremely low reading. As is typical after such an outlier print, it bounced back slightly to 0.57. The 10-day moving average fell to 0.65, a two-week low.

Let’s take a closer look at the options activity:

Beyond Meat (BYND)

The short squeeze in Beyond Meat (NASDAQ:BYND) shares just entered the insanity phase. BYND stock ended Monday up 21% after rising as high as 34% on the session. All told, that brings its post-IPO gain to 274%. And we’re only talking about five weeks. Cooler heads are prevailing premarket with the stock down 11%. JPMorgan Chase (NYSE:JPM) downgraded the company to “neutral” from “overweight” this morning citing its eye-popping valuation.

The firm’s price target, which was blown out of the water on Friday during the post-earnings buying binge, remains at $120.

Any pullback over the coming days will likely prove a buying opportunity. You should resist the urge to chase at the open this morning. We could drop back to $120 or, heck, even $100 and the retracement still qualify as a great setup.

On the options trading front, calls were the hot ticket for the session. Total activity ramped to 331% of the average daily volume, with 218,111. Calls claimed 53% of the day’s take.

Implied volatility shot to the moon, ending the day at 133%. With premiums in the stratosphere, bull put spreads aren’t a bad way to go after the stock pulls back a few days.

Salesforce (CRM)

Merger Monday lived up to its namesake yesterday with Salesforce (NYSE:CRM) announcing an all-stock transaction to purchase data analytics platform Tableau Software (NYSE:DATA). The $15+ billion deal marks the company’s largest acquisition ever. DATA stock zoomed 34% higher to close the day at $167.41; CRM stock fell 5.3%.

The posture of CRM’s price chart makes it a tricky read here. It remains near the middle of its four-month range. The meandering has gone on long enough to turn the 20-day, 50-day and 200-day moving averages sideways. Until we break the stalemate, directional trades are suspect.

On the options trading front, traders favored calls throughout the day. Total activity grew to 356% of the average daily volume, with 168,003 contracts traded; 65% of the trading came from call options alone.

The increased demand drove implied volatility higher on the day to 34%, placing it at the 33rd percentile of its one-year range. Premiums are now baking in daily moves of $3.26 or 2.1%.

Netflix (NFLX)

Netflix (NASDAQ:NFLX) shares flashed a warning sign yesterday in the form of a high volume distribution day at resistance. The beating created a bearish engulfing candle to solidify the dominance of the $366 ceiling. If you’re a buyer, it’s hard to get excited until NFLX stock finally climbs above it.

Like CRM, Netflix shares find themselves stuck in a narrow trading range that has persisted since January. While the other members of the FAANG gang have seen both uptrends and downtrends this year, NFLX has not. The eventual victor of its tug-of-war remains elusive. I suggest waiting for confirmation in the form of a breakout before placing your bets.

On the options trading front, calls ruled the roost despite the day’s drubbing. Total activity ended at 69% of the average daily volume, with 188,262 contracts traded. Calls accounted for 69% of the tally.

Implied volatility inched higher to 44% or the 40th percentile of its one-year range. The expected daily move is now $9.76 or 2.8%.

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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