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Options Traders React to Blue-Chip Earnings

There's very heavy options activity on CAT, MMM, and MCD after earnings

Oct 23, 2018 at 3:26 PM
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The Dow is trading lower today following a disappointing round of corporate earnings. Most notably, blue chips Caterpillar Inc. (NYSE:CAT) and 3M Co (NYSE:MMM) are leading the sell-off, overshadowing upbeat results from McDonald's Corporation (NYSE:MCD). Below, we'll look at how shares of CAT, MMM, and MCD are trading today, and how the options market is responding.

CAT Stock Hits New Low After Earnings

CAT stock is trading down 7% at $119.75, flirting with its worst one-day loss since January 2015, as investors react to the company's decision not to raise its full-year earnings forecast. The shares hit a 52-week low of $115.65 earlier, losing 23% in the past month alone, and are now pacing for a fifth straight daily decline.

In response, intraday Caterpillar options volume has already more than tripled the daily average. On the call side, traders are opening new positions at the November 120 strike, the most popular contract today. The most popular put, meanwhile, is the November 115 strike, where new positions are also being initiated. Coming into today, put buying was unusually popular, with the 10-day put/call volume ratio of 1.22 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranking just 3 percentage points from a 12-month peak.

3M Put Options Hot After Weak Forecast

MMM stock hit a 20-month low today, bottoming at $184.50, and was last seen trading down 3.7% at $193.93. The company lowered its full-year profit outlook after announcing its largest quarterly revenue miss in two years. Overall, 3M is down almost 18% in 2018.

3M options volume is also running well above the daily average, with more than 17,000 puts crossing, compared to 12,000 calls. Leading the way are the weekly 10/26 185- and 190-strike puts, with new positions opening at each. Put buying had also been popular on MMM coming into today, according to its 10-day put/call volume ratio of 1.52 at the ISE, CBOE, and PHLX, ranking in the 95th annual percentile.

MCD Stock Flirts with New High After Earnings

MCD shares are spiking 6% to trade at $176.73 -- pacing toward their best day in three years -- putting them within striking distance of the Jan. 29 record peak of $178.70. Fueling the move is McDonald's better-than-expected global same-store sales for July-September period. The stock had already been trending higher since an early August low near $153, gaining 12% in the past three months. Options traders may be betting on more upside, too, with new positions opening at the weekly 10/26 172.50-, 175-, and 177.50-strike calls.

 

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