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Traders needed to buckle up for a potentially wild Monday. Two major stocks are splitting, others are joining the
Dow Jones Industrial Average,
while still other companies are selling stock, capitalizing on a hot market to raise billions.
There is a lot to keep track of. Here’s what to expect Monday, along with some recent history.
(ticker: TSLA) shares split 5 for 1 on Friday. Since announcing the split on Aug. 11, shares had gained 61%. The move is surprising. Near midday Monday, the first day of trading at the split-adjusted price, shares were up another 9% to $482.53. There seems to be no stopping them. Coincident with the stock split, Argus analyst Bill Selesky increased his price target to a Street-high $566 a share.
Tesla’s call options—the right to buy a stock at a set price—have also become much more expensive, and have been traded far more frequently than put options—the right to sell a stock at a set price. That is significant for a few reasons.
First, it illustrates what investors take the split as a bullish sign. Second, skewed options trading can help push stock prices higher. When brokers for instance, sell a call option, they don’t want to take the risk of a big stock-price rise. They need to hedge their position, which can involve buying the underlying stock, among other actions.
The call-option action could mean Tesla stock is due for a correction. That is if the call buying activity slows down. Essentially, the recent trading action can mean the good news—the split in this instance—is already reflected in Tesla shares.
Looking ahead, bullish investors are waiting for Tesla shares to be included in the
—something they qualified for with the recently reported quarterly profit—as well as the coming battery technology day on Sept. 22. Tesla will presumable talk about battery costs and reliability, which have big implications for how competitive EVs are compared with traditional auto makers and how big Tesla’s competitive lead is over EV competition.
(AAPL) announced its stock split on July 30. Since then, shares are up about 30%, giving the tech-giant a market capitalization of more than $2 trillion.
Over the past month, Apple call options have been more heavily traded than put options, just like Tesla. They pricing skew—with calls and puts priced differently—has been less dramatic.
Like Tesla, Apple stock could be due for a correction. There is no battery day or S&P 500 inclusion. But, of course, the price run-up has been less dramatic and the price gains were due, in part, to strong earnings.
The correction isn’t here yet. Apple shares were up 3.6% midday to the new split-adjusted price of $129.22 a share.
(There are myriad call and put options contracts to review, with different strike prices and expiration dates. Barron’s reviewed some of the near-term options with higher than average volume.)
Monday was also the day
(AMGN) joined the Dow.
(PFE) left the index.
Since the announcement a week ago, Salesforce, Honeywell and Amgen shares are up 30%, 5.7% and 7.5%, respectively. Raytheon has gained 0.6%, while Exxon and Pfizer have dropped 3.6% and 2.4%, respectively.
Joining the Dow doesn’t matter much, because there isn’t a lot of money indexed to the Dow. The amount is tens of billions compared with multiple trillions indexed to the S&P. Still, the stocks moved. Salesforce shares, of course moved higher after a strong earnings report.
In midday trading, five of the six stocks were down slightly. Pfizer shares were flat. Traders shouldn’t expect much more surprising trading action.
Finally, U.S. listed Chinese electric-vehicle maker
(NIO) also added to Monday’s complexity when it sold 88.5 million shares—officially American depositary receipts, or ADRs, in the case of NIO—at $17, an 8% discount to where shares closed on Friday. (ADRs, essentially, are shares in foreign companies listed in the U.S.)
NIO is using strong market conditions to raise cash. EV stocks Barron’s tracks are up more than 300% year to date on average. And
(LI) as well as
(XPEV) just raised billions in their own initial public offerings. Stock sales could mean a slight cooling off the ultrahot EV market, with investors questioning whether capital raising is a sign of a market peak.
Monday trading might not be easy, but it should be fun for many Wall Street denizens to participate in. And it has been a great month for stocks. Coming into the final day of August, the S&P is up 7.2% for the month. The Dow is up 8.4% and the
has gained 8.8%.
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