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Most Active Options Update: Verizon Communications Inc. (VZ)

Verizon Communications Inc. option bull bets on a rebound

by 2/26/2014 2:34 PM
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. One name of notable interest this afternoon is Verizon Communications Inc. (NYSE:VZ).

Most

Verizon Communications Inc. is coming under heavy attack by options traders today, with overall volume running at more than three times the typical intraday pace. Calls have easily emerged as the crowd favorite, and are outpacing puts by a margin of nearly 3-to-1. The most active strike is the April 49 call, and in fact, this contract is the most actively traded option among all equities thus far.

Diving deeper reveals that one speculator is expecting VZ to make a technical turnaround over the next seven-plus weeks. Specifically, a hefty block of 37,217 April 49 calls changed hands shortly after the open at the ask price of $0.47. Implied volatility ticked higher at the transaction, and Trade-Alert indicates this large lot of out-of-the-money calls was bought to open.

By initiating the long calls, the expectation is for VZ to regain its footing atop the $49 mark -- a perch it surrendered in early January. According to the options market, there is a less than 1-in-4 chance of the stock being north of the strike price at expiration on Thursday, April 17, as delta for the call was last seen at 0.24. Should VZ fail to move the 5.8% needed to make this forecast a reality, the most today's call buyer can lose is the initial premium paid. This, however, equates to roughly $1.75 million for the aforementioned trader (number of contracts, times initial premium paid, times 100 shares per contract).

On the charts, Verizon has had a tough go of it lately, pressured lower by its descending 10-week moving average -- currently situated at $48.16 -- since mid-December. In fact, over the past two months, the shares have lost 5.8% to linger near $46.30.

Off the charts, despite providing an upbeat outlook for the fiscal year on Monday, Verizon Communications Inc. (NYSE:VZ) received a bearish brokerage note early Tuesday. Meanwhile, the House of Representatives yesterday passed a bill to allow cellphone customers to "unlock" their handheld devices from domestic carriers. The bill will now move on to the Senate.


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