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Verizon Communications Inc. (NYSE:VZ) experienced a surge of activity in its options pits yesterday, with total volume of 2.7 times the daily norm. More specifically, 35,000 calls -- three times the daily norm -- and 17,000 puts changed hands over the course of the session.
Yesterday's most active option for VZ was the August 55 call, where 5,236 contracts crossed at a volume-weighted average price (VWAP) of $0.20. More than three-fourths of the contracts went off at the ask price, volume exceeded open interest, and open interest added 4,680 positions overnight, collectively conveying heavy buy-to-open activity.
With this play, yesterday's call buyers anticipate VZ will hurdle past its multi-year high of $54.31 by the close on August 16, when the option expires. Specifically, they expect VZ to finish north of the breakeven price of $55.20 (strike price plus the VWAP), territory unreached in over 10 years. Therefore, if VZ continues to linger below the 55 strike, the call buyers could lose, at most, the initial premium paid per contract.
On the charts, Verizon Communications Inc. is up 16.1% year-to-date. However, since hitting its aforementioned multi-year peak on April 30, the stock plummeted 12% to $47.77 on Monday. VZ is currently in bounce-back mode, however, and at last check, stood at $50.23.
Overall activity in VZ's options pits seems to be bullishly skewed. In fact, during the past two weeks, speculators have bought to open almost two calls for every put, according to the stock's International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) 10-day call/put volume ratio of 1.88. This ratio ranks in the 89th percentile of its annual range, meaning calls are being snatched up over puts at a higher-than-usual pace. Likewise, VZ's Schaeffer's put/call open interest ratio (SOIR) of 0.93 ranks just 10% above its annual nadir, indicating that put open interest, relative to call open interest, is at a near-annual low for options expiring in the next three months.
Outside the options pits, the brokerage bunch holds skeptical-to-bullish sentiment toward VZ. Of the 27 analysts weighing in, 14 endorse the stock as a "buy" or better, while 13 give it a lukewarm "hold" rating.