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Most Active Options Update: AT&T Inc. (T)

T put traders opt for out-of-the-money, back-month bets

by 9/6/2013 1:25 PM
Stocks quoted in this article:

The 20 stocks in the table below have attracted the highest options volume -- in the front three-months' series -- during the past 10 trading days. The companies highlighted are those new to the list since the last time the study was run. Data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Three names of notable interest this afternoon are AT&T Inc. (NYSE:T), Micron Technology, Inc. (NASDAQ:MU), and Citigroup Inc (NYSE:C).

Call buyers are once again focused on Citigroup Inc, and have their sights set on the October 52.50 strike. Overall call volume is currently pacing about 60% above a typical day, and this out-of-the-money call is the most active of the bunch, with more than 70% of the volume trading at the ask price. Meanwhile, Micron Technology, Inc. saw a block of 5,000 April 15 puts change hands. The block was tied to a stock position, and flagged as opening. MU shares stretched to a new multi-year high of $15.36 earlier today, but are now in the red. Finally, here's a quick look at today's options trading activity in the AT&T Inc. pits.


Puts are in fashion on T today, as roughly 28,000 contracts have changed hands. This is more than twice what is generally seen on an intraday basis, and is almost quadruple the number of calls that have changed hands. Some of this volume, however, may not be as bearish as it might initially seem.

Most active by a mile is the October 31 put, where nearly 17,000 contracts have traded, three-fifths of which crossed at the ask price. Of note, however, is one block of roughly 4,500 contracts that recently changed hands at the bid price of $0.29 per contract. These positions may have been sold to open by traders who expect the stock to hover above $31 through October options expiration. If T instead breaches this strike, the put sellers would likely be on the hook to buy the shares at $31 apiece, regardless of the market price.

On the flip side, those who purchased these puts -- for a volume-weighted average price (VWAP) of $0.28 -- are looking for T to descend south of $30.72 (the strike price less the VWAP) by the time October options expire. This is a nearly 8% drop from the stock's current perch at $33.39.

Long puts have been popular among T speculators for the past two weeks, as evidenced by activity on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Over the last 10 trading sessions, nearly three puts have been purchased to open on these exchanges for every call. The resulting put/call volume ratio of 2.91 stands at an annual high, indicating that long puts have never been in greater demand over the last year.


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