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Option Buyers Think AT&T Inc. (T) Will Continue to Rally

Traders bought to open AT&T Inc.'s weekly 7/3 36.50-strike calls yesterday

by 6/24/2014 9:59 AM
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Option Brief: AT&T Inc. (NYSE:T) calls traded at a 20% mark-up to the average daily pace yesterday. Short-term contracts were in demand, too, as evidenced by the 9% rise in the stock's 30-day at-the-money implied volatility, which closed at 12%.

In focus on Monday was T's weekly 7/3 36.50-strike call, where over 3,900 contracts were exchanged. Most of these were bought to open at a volume-weighted average price (VWAP) of $0.02, making at-expiration breakeven $36.52 (strike plus VWAP) -- within striking distance of the equity's annual high of $36.86, touched on May 8. Additional gains will accrue with each step above breakeven, while the most the traders have on the line is the initial premium paid, should T be perched below $36.50 at the close next Thursday, when the weekly options expire.

On the fundamental front, AT&T Inc. (NYSE:T) announced this morning it will deploy a high-speed network in Chapel Hill, North Carolina. Technically speaking, the shares have been in rally mode since bouncing off of their 80-day moving average on June 12; specifically, T has tacked on 2.6% since then, and now trades at $35.51.


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