Stocks quoted in this article:
The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are AT&T Inc. (NYSE:T), Google Inc (NASDAQ:GOOG), and General Electric Company (NYSE:GE).
On the heels of Google Inc's well-received earnings reports (and an inaugural move above the millennium mark), option volume is running at nearly 10 times the average intraday volume. General Electric Company is also trading higher after reporting earnings, prompting one speculator to roll up her bullish bets in the GE's December series of options. Meanwhile, here's a closer look at how one speculator is using AT&T Inc. calls and puts to simulate a stock purchase.
AT&T Inc. shares have been under pressure since hitting a five-year high of $39 on April 23, with the shares off nearly 11% in that time to trade at $34.74. However, T has been on the mend of late, and, in today's session -- amid reports of a partnership with Tesla Motors Inc (NASDAQ:TSLA) -- the equity is attempting to notch its first close north of its 20-week moving average since late May.
Speculators in T's options pits have been taking note of this recent rebound, and over the past 10 sessions, traders at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open nearly seven calls for each put. What's more, the resultant 10-day call/put volume ratio of 6.71 ranks in the highest percentile of its annual range, meaning long calls have been initiated relative to puts at an annual-high pace.
Today, it appears that one speculator is using both calls and puts to simulate a stock purchase on T. Shortly before noon, two symmetrical blocks of 16,116 November 30 puts and November 37 calls simultaneously crossed the tape. The former went off at the bid price of $0.03, while the latter changed hands at the ask price of $0.04, creating a net debit of $0.01 per pair of contracts. Implied volatility ticked higher at each strike, and data from the ISE confirms sell- and buy-to-open activity, respectively. In other words, it appears the trader sold the puts to offset the cost of the long calls, creating a split-strike synthetic long stock position.
Gains for the play are theoretically unlimited with each step above $37.01 (call strike plus the premium paid) T takes through the close on Nov. 15 -- a time frame that encompasses the company's quarterly earnings report. If the stock stays perched between $30 and $37, risk is limited to the initial net debit. The worst-case scenario is for T to fall south of $30, which would pull the sold puts into the money, and possibly put the trader on the hook to deliver the shares at $30 apiece, regardless of how low the stock is trading.
As noted, AT&T Inc. (NYSE:T) is slated to unveil its third-quarter earnings report after the market closes on Oct. 23. The telecommunications firm has matched or exceeded analysts' bottom-line estimates in five of the past eight quarters. The stock has followed up these reports by posting a 1% loss and 1.1% gain, on average, in the subsequent day and week, respectively. For T's third quarter, Wall Street is calling for earnings of 65 cents per share -- a 2-cent improvement from last year's results.