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Option Brief: AT&T Inc. (NYSE:T) options volume is exploding today, as 58,000 contracts have crossed the tape -- more than six times the intraday average. Most active by a mile is the December 35 call, which has seen nearly 37,000 contracts cross the tape. According to Trade-Alert, the majority of these transactions were of the buy-to-open variety.
By initiating the long calls, today's traders are hoping shares of T advance from their current perch at $34.46 past the strike price by the closing bell on Dec. 20, when the options expire. If those gains fail to materialize, the most the speculators risk losing is 100% of the premium paid -- although that number has increased during the course of today's session, with the stock's 30-day, at-the-money implied volatility up 0.7 percentage point, or 5.3%, at midday.
From a sentiment perspective, short interest comprises just 2.5% of AT&T available float. However, at the stock's average daily trading volume, it would take over a week to cover those shorted shares. In other words, it's possible some of today's out-of-the-money call buying was the product of shorts seeking to protect their bearish bets against a rally.
Fundamentally, AT&T Inc. (NYSE:T) has made the headlines today, which may have prompted the aforementioned trading activity. Domestically, the telecom concern announced changes to its no-contract cell phone plans, effective Sunday, Dec. 8. Internationally, T struck a Network-to-Network Interconnect (NNI) agreement with India's Bharti Airtel.