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Wednesday’s Vital Data: Kohl’s, Bank of America and Micron Technology

Tyler Craig

U.S. stock futures are trading lower premarket. But, honestly, what’s new? Down gaps are becoming a daily occurrence, only occasionally interrupted by an up gap. The headline for today is “the summer chop continues.”

Against this backdrop, futures on the Dow Jones Industrial Average are down 0.31%, and S&P 500 futures are lower by 0.38%. Nasdaq-100 futures have shed 0.60%.

In the options pits, overall volume levels fell off a cliff yesterday. Calls proved more popular than puts adding to 14.6 million contracts versus 11.8 million traded for puts.

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The ebb in put demand sent the CBOE single-session equity put/call volume skidding to 0.57 — a two-week low. The 10-day moving average finally rolled over, falling to 0.71.

Options trading for individual stocks was a veritable snooze fest. Many of the companies that landed on the top ten list didn’t even exceed their average daily volumes. Today we’ll breakdown Kohl’s (NYSE: KSS ), Bank of America (NYSE: BAC ) and Micron Technology (NASDAQ: MU ).

Let’s take a closer look:

Wednesday's Vital Data: Kohl's, Bank of America and Micron Technology

Kohl’s (KSS)

Kohl’s reported earnings on Tuesday and investors were not pleased by the results. The selling frenzy took KSS stock down 12.3% amid colossal trading volumes. By day’s end, 26 million shares had changed hands, marking the highest volume session since January 2017.

With the downdraft, shares of the retailer now sit at an eighteen-month low, submerged well beneath all major moving averages. The gap places KSS in no man’s land from a price chart perspective, and that makes it challenging to build out a trade. Perhaps the best play is to wait for some type of relief rally, then deploy bear trades when it fails.

For a more in-depth view on the earnings numbers, go here .

On the options trading front, traders gobbled up put options. Activity ballooned to 522% of the average daily volume, with 76,111 total contracts traded; 62% of the trading came from put options alone.

Ahead of the number, options were anticipating a gap of $4.25 or 6.7%, so the 12.3% doubled expectations. Volatility buyers via straddles or strangles won the day. Implied volatility fell throughout the day, landing at 36% or the 29th percentile of its one-year range.

Bank of America (BAC)

The price chart of BAC stock provides little excitement. Even when it’s trending, it lacks the sexiness of a tech stock. Unfortunately, it doesn’t even have that going for it. Outside of the quick jump that kicked-off the new year, BAC has been stuck in a choppy trading range between $28 and $30. At present, it’s basing at the lower end of the range.

If you’re inclined to trade it, I suggest cash flow plays like covered calls and naked puts. Directional trades are too hard right now.


On the options trading front, traders favored calls over puts. Total activity came in slightly below normal at 98% of the average daily volume, with 234,336 contracts traded. Calls claimed 34% of the sum.

Implied volatility slipped to 24% placing it at the 25th percentile of its one-year range. Premiums are quickly becoming cheap here. The expected daily move is 44 cents or 1.5%.

Micron (MU)

The recent trade war flare-up has proved particularly painful for semiconductors. Since topping out last month, MU stock has fallen 20% — entering a Wall Street defined bear market in the process. Yesterday’s market rally lifted the ailing chip company from the depths, for a day at least.

Unfortunately, there’s still plenty of overhead resistance and one up day does little to change the overall downtrend. More evidence is needed before the trend has turned higher.

As far as options trading goes, puts were the hot ticket of the day. The total activity ended at 93% of the average daily volume, with 117,729 contracts traded. Puts accounted for 65% of the tally.

Implied volatility dropped to 49% landing it at the 39th percentile of its one-year range. It’s still high enough to make short premium strategies compelling. The expected daily move is now $1.11 or 3.1%.

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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