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AT&T Inc.'s (T) Near-Term Traders Go Against the Bullish Grain

Weekly put volume picks up steam on T

by 5/3/2013 1:56 PM
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AT&T Inc. (NYSE:T) is bucking the broader market trend higher today, and the bears have taken notice. Roughly 16,000 puts have crossed the tape thus far -- a 25% mark-up over the norm, and more than double the number of calls exchanged. A number of these traders are of the short-term variety, and are expecting the telecom stock to keep trekking lower over the next several days.

Garnering notable attention is the weekly 5/10 37.50 strike, where close to 2,800 puts have changed hands -- the majority of them at the ask price, pointing to buyer-fueled activity. These near-the-money contracts traded at a volume-weighted average price (VWAP) of $0.31. Since today's volume outstrips current open interest levels, it's probable that new bearish bets are being added here.

In order for speculators to realize a profit from their bought-to-open puts, T must retreat below breakeven at $37.19 (strike price less the VWAP) by next Friday's close, which is when these weekly contracts expire. This is just a stone's throw away from the security's present perch at $37.34. What's more, the delta for these options is docked at negative 0.58, giving them a 58% chance of arriving in the money.

This penchant for puts over calls flies in the face of T's current trend in the options pits. The stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio stands at 1.59, confirming calls bought to open have easily outstripped puts during the past two weeks. This ratio ranks higher than 82% of similar annual readings, meaning traders have been scooping up bullish options over bearish at an accelerated clip.

As a result, Schaeffer's put/call open interest ratio (SOIR) for AT&T Inc. checks in at 0.82, with calls outpacing puts among options due to expire in the next three months. In fact, this ratio is docked at an annual nadir, meaning near-term traders are more call-heavy toward the equity now than at any other time during the last 12 months.

On the technical front, T has added almost 11% year-to-date, and nearly 13% on a year-over-year basis. However, the shares are on pace to finish an eighth consecutive session below their 20-day moving average, which had previously acted as support since late January.


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