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Option Bears Predict a Summer Swoon for AT&T Inc. (T)

AT&T Inc.'s most active strike yesterday was the June 36 put

by 4/16/2014 10:40 AM
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Option Brief: AT&T Inc. (NYSE:T) call volume ran ahead of put volume yesterday, but the most active option was actually a put. Specifically, close to 6,800 contracts traded at the June 36 strike. Nearly three-quarters were exchanged off the ask price, and open interest added almost 5,800 positions overnight, collectively indicating buy-to-open activity. A portion of these bearish bets are confirmed by data from the International Securities Exchange (ISE).

By purchasing the puts to open, the traders expect T to extend its journey south of the 36 strike through June options expiration. Specifically, based on the option's volume-weighted average price (VWAP) of $1.13, the speculators are eyeing the breakeven level of $34.87 (strike less VWAP). However, if the shares rebound above $36, the most the T put buyers stand to lose is the initial premium paid. At last check, the security was churning just north of yesterday's close, at $35.70.

On the fundamental front, AT&T Inc. (NYSE:T) will take its turn under the earnings spotlight next Tuesday evening. The Street is expecting a per-share profit of 69 cents from the telecom name -- a 5-cent improvement from the stock's year-ago result.


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