Stocks quoted in this article:
Of the 20 equities seeing the heaviest options volume in recent sessions, three names of notable interest this afternoon are Cisco Systems, Inc. (NASDAQ:CSCO), Verizon Communications Inc. (NYSE:VZ), and AT&T Inc. (NYSE:T). Here is a quick look at today's interesting activity in these options pits.
Cisco Systems, Inc.'s (NASDAQ:CSCO) $22 mark has caught the eye of option players recently. However, instead of betting on a continued move south of this level like Friday's speculators, today's option players are forecasting a move north of here over the next several sessions. More than 1,900 April 22 calls have changed hands thus far, the majority at the ask price. Implied volatility was last seen 8.7 percentage points higher, pointing to buy-to-open activity. By purchasing these out-of-the-money calls for a volume-weighted average price (VWAP) of $0.04, traders will begin to profit with each step above $22.04 (strike price plus VWAP) Cisco Systems takes through Friday's close -- when front-month options expire. This breakeven mark represents expected upside of 3.6% from CSCO's current perch at $21.28. The options market isn't too confident the call will land in the money ahead of expiration, as delta for the position is docked at 0.10, or 10%. In the near term, CSCO could struggle against the aforementioned strike price, as peak call open interest in the soon-to-expire front-month series rests at the stock's April 22 strike. This campaign for calls could translate into options-related resistance as the hedges related to these bets unwind ahead of Friday's close.
Verizon Communications Inc. (NYSE:VZ) tagged an 11-year high of $51.06 today, but the stock has succumbed to the broad-market trend lower, and was last seen hovering just below breakeven at $50.85. One trader is betting on Verizon to resume its uptrend in the long term, though, and is rolling up his call options in VZ's January 2014 series. Shortly before noon, one block of 8,900 contracts traded at VZ's January 2014 52.50 call at the bid price of $1.64, while a symmetrical block simultaneously crossed at the stock's January 2014 57.50 call closer to the ask price of $0.50. From the looks of it, it appears as though this speculator is closing out of his 52.50 calls, and is upping the bullish ante by buying to open the 57.50 calls, resulting in a net debit of $1.14. Breakeven for the further out-of-the-money calls is $58.64 (strike plus net debit), or 15.3% above current levels. Fundamentally, Verizon Communications Inc. announced today that it will buy up to $1.5 billion in spectrum leases from Clearwire Corporation (NASDAQ:CLWR).
Elsewhere on the telecom circuit, AT&T Inc (NYSE:T) is being targeted by put players today. Roughly 18,000 contracts have crossed the tape -- a 38% uptick to the stock's average intraday put volume. T's July 38 put is the most active strike thus far, where 98% of the 3,534 contracts traded have crossed at the ask price. Implied volatility has ticked higher throughout the session, and volume is outstripping open interest, suggesting that a portion of today's activity is of the buy-to-open variety. These out-of-the-money puts are being picked up for a VWAP of $1.20, making breakeven $36.80 (strike less VWAP), or 4% below AT&T's current price of $38.36. Delta for the put is resting at negative 0.50, or 50%, suggesting a 1-in-2 chance the option will be in profitable territory by expiration. On the fundamental front, the U.S. Justice Department told Federal Communications Commission (FCC) regulators on Friday that smaller companies such as Sprint Nextel Corporation (NYSE:S) and T-Mobile USA should be given a fighting chance against heavyweights T and VZ when the FCC begins auctioning off spectrum. The rules for the sale are tentatively slated to be released sometime within the next year.
The 20 stocks below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those that are new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White.