Vital Data: Intel, Nvidia and Cisco

U.S. stock futures are trading broadly higher this morning as Wall Street joins in a global stock rally. The Dow Jones Industrial Average is on course to open above the benchmark 25,000 level, as the bull rally shows no signs of slowing.

Economic data could help bolster the bulls’ case today. The ADP payrolls report will hit ahead of the open, and traders will be scrutinizing the report prior to tomorrow’s December non-farms payrolls data. Meanwhile, weekly jobless claims are also on tap as well as the Markit services purchasing managers index for December.

Heading into the open, Dow futures are up 0.35%, S&P 500 futures are up 0.18% and Nasdaq-100 futures have added 0.3%.

Turning to the options pits, Wednesday’s volume was extremely brisk as traders finally came back in full force after the holiday break. Overall, about 22.2 million calls and 15.9 million puts changed hands. The CBOE single-session equity put/call volume ratio rebounded from a multi-year low to finish at 0.54. The 10-day moving average held at  0.56.

Taking a closer look at Wednesday’s options activity, Intel (NASDAQ:INTC) was swamped with put volume following news of a security vulnerability in its chips. Meanwhile, Nvidia (NASDAQ:NVDA) received bullish analyst praise in the wake of the Intel debacle. Finally, Cisco (NASDAQ:CSCO) trades ex-dividend today.

Thursday’s Vital Options Data: Intel Corporation (INTC), Nvidia Corporation (NVDA) and Cisco Systems, Inc. (CSCO)
Thursday’s Vital Options Data: Intel Corporation (INTC), Nvidia Corporation (NVDA) and Cisco Systems, Inc. (CSCO)

Intel Corporation (INTC)

Intel admitted yesterday that its semiconductors have a critical vulnerability requiring a software patch. The company also noted that Advanced Micro Devices (NASDAQ:AMD) chips were also affected, though not to the same degree of severity.

According to a report in The Register, the fix for Intel’s security hole will slow down affected systems by 5% to 30%. AMD chips will not be affected by the slowdown issues with the patch. In a statement late Wednesday, AMD said there was a “near zero” chance its chips could be affected.

Intel stock dropped 3.4% on the news and is down another 2.5% in premarket trading this morning. The negativity drove heavy put volume on INTC stock. Volume rose to 503,000 contracts on Wednesday, more than five times Intel’s daily average.

Put options made up about half of that heavy volume, pushing INTC’s January put/call open interest ratio higher to 1.40. Peak put OI for the series now totals more than 72,000 contracts at the $45 strike. INTC stock is poised to open below $45 later this morning.

Nvidia (NVDA)

With its name not mentioned at all in yesterday’s chip debacle, Nvidia stock rallied roughly 6.5% in relief on the day. Bullish commentary from RBC Capital also helped lift NVDA stock.

According to RBC Capital, sales from Nvidia’s data center business should rise by 50% in 2020. The ratings firm also sees video games as a huge lift for the company due to strong sales from Nintendo (OTCMKTS: NTDOY), with the Switch providing a solid stream of revenue.

Options traders took advantage of NVDA’s rally, sending more than 320,000 contracts across the tape on the shares — more than 2.6 times Nvidia’s daily average. Calls made up 64% of the day’s take.

That said, there is still a fair degree of pessimism levied against Nvidia stock in the January 2018 series. Currently, the front-month put/call OI ratio arrives at 1.18, with puts clearly in control.

Still, NVDA has broken through heavy put and call accumulations at the $200 strike. The $220 call the only significant area of options open interest left above it in January.

Cisco (CSCO)

It’s ex-dividend day for CSCO stock. As you would expect, the shares were inundated with call options volume yesterday as traders sought out dividend capture strategies.

In one scenario, traders buy Cisco stock and sell in-the-money call options as a way to hold the shares for a short a time as possible in order to collect the dividend.

As for CSCO options volume, more than 525,000 contracts traded on the day, amounting to more than 12 times the stock’s daily average. Calls made up 98% of the day’s take, naturally.

  • Apple Inc. Stock Could Be in for a Rough 2018 on Weak iPhone Demand

Cisco stock is hovering just below key resistance and heavy options open interest at $40. A breakout above this level would be a major sentiment victory for CSCO bulls.

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