Thursday’s Vital Data: Disney, Walmart and Cisco

Stock Market

U.S. stock futures are inching lower this morning to create another small gap down at the open. We’ve seen this movie many times in recent weeks and every time it has ended with bulls emerging to buy the dip. If they fail to show today, it will mark a definite change of character and warrant caution in the short run. Otherwise, the slow grind higher continues.

Source: Shutterstock

In early morning trading, futures on the Dow Jones Industrial Average are down 0.14% and S&P 500 futures are lower by 0.19%. Nasdaq Composite futures have lost 0.26%.

In the options pits, call volume made a comeback, pushing north of 20 million to 21.6 million. Puts lagged and only saw 16 million contracts change hands. Meanwhile, the action at the CBOE Volatility Index (VIX) leaves little room for discussion. It mirrored Tuesday’s trading by keeping the single-session equity put/call volume ratio at 0.58. The 10-day moving average held its ground at 0.59.

Disney (NYSE:DIS) saw heavy call activity after the launch of its highly anticipated Disney + streaming service. Walmart (NYSE:WMT) calls were popular ahead of this morning’s earnings report. Finally, Cisco (NASDAQ:CSCO) options trading surged in anticipation of last night’s earnings.

Let’s take a closer look.

Disney (DIS)

Source: ThinkorSwim

Source: ThinkorSwim

Disney+ is finally here. And shareholders are dancing in the streets at the warm reception. On the first day, over 10 million people signed up for the service. Wall Street’s enthusiasm was on full display with a magical 7.3% rally launching DIS stock to record highs. Approximately 46.5 million shares traded on the session marking the highest volume day since mid-April.

Shares of the entertainment giant were already flying high after last week’s earnings report topped estimates. But Tuesday’s jaw-dropping jump takes things to a whole other level. I suspect we’ll seem some backing and filling in the days to come as the gains get digested. That said, there’s no doubt DIS stock is a definite buy into any weakness that crops up.

On the options trading front, traders went bananas for call options. Total activity soared to 8 times the average daily volume, with 988,963 contracts traded. 80% of the trading came from call options alone.

Traders’ appetite for options can be seen in implied volatility. It surged to 26% or the 44th percentile of its one-year range. Premiums are pricing in daily moves of $2.45 or 1.6%. If you think the rally sticks, sell the Dec $140/$135 bull put spread for around 90 cents.

Walmart (WMT)

Source: ThinkorSwim

Source: ThinkorSwim

The height of the earnings season has long past, but not all heavy hitters have stepped up to the plate. This morning, Walmart posted its quarterly report, and the numbers were good enough to send WMT stock up 2.6% in pre-market trading.

For the quarter, the retail juggernaut raked in adjusted earnings per share of $1.16 versus estimates calling for $1.09. The top line wasn’t so pretty, with sales rising to $127.99 billion versus forecasts for $128.65 billion. What had investors particularly jazzed though was the company’s updated forecast to full-year earnings that calls for a slight increase over last year — this marked improvement to previous estimates.

WMT stock entered the announcement up a smile-inducing 30% on the year. Its price trend has the shares rising above all major moving averages, leaving little doubt that the path of least resistance remains higher.

The anticipation of this morning’s report created a buzz in WMT options trading. Calls outpaced puts by a wide margin driving 62% of the total activity. Some 167,675 contracts changed hands, rising to 579% of the average daily volume.

The expected move ahead of earnings was 3.6%, so this morning’s 2.6% pop falls well within expectations. Volatility sellers should emerge slight winners this morning.

Cisco (CSCO)

Source: ThinkorSwim

Source: ThinkorSwim

While Walmart impressed investors, Cisco mostly disappointed them. The technology company is trading down almost 6% in pre-market trading after providing an underwhelming projection for next quarter’s sales during last night’s earnings report. The forecast calls for a 3%-5% year-over-year decline in total sales.

CSCO stock is set to open near $45.70, which will result in a critical test of a support zone that has halted several recent selloffs. A crack below it will send warning signs to shareholders and could result in another leg lower. With so many other tech stocks flying high, I see little reason to bottom fish in CSCO right here.

Wednesday’s options trading saw calls win the popularity contest. Total activity zoomed to 354% of the average daily volume, with 200,014 contracts crossing the table. Calls added 62% to the day’s take.

The expected move for earnings was 4.7%, so this morning’s whack falls just outside of the range. Volatility buyers should awake to a win at the open. Further selling pressure could add to their profit pile.

As of this writing, Tyler Craig held bullish positions in DIS. For a free trial to the best trading community on the planet and Tyler’s current home, click here

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