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Options Radar: T-Mobile US, Sprint, and L-3 Communications Holdings

Reviewing notable options activity on T-Mobile US Inc, Sprint Corporation, and L-3 Communications Holdings, Inc.

by 7/31/2014 1:33 PM
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Three stocks seeing notable options activity today are telecommunication firms T-Mobile US Inc (NYSE:TMUS) and Sprint Corporation (NYSE:S), as well as aerospace issue L-3 Communications Holdings, Inc. (NYSE:LLL). Here's a look at how today's options traders have been placing their bets on TMUS, S, and LLL, all of which were halted earlier on the Big board.

  • TMUS has jumped 7.7% to $33.30 this afternoon, after its stronger-than-expected second-quarter earnings report was followed up by a buyout offer from French telecommunications concern Iliad SA. Against this backdrop, options players are scooping up calls at a rate six times the intraday average. The most active TMUS option is the September 32 call, which is being bought to open for a volume-weighted average price (VWAP) of $2.02. Gains for the call buyers are theoretically unlimited past the at-expiration breakeven mark of $34.02 (strike plus VWAP). Risk, meanwhile, is capped at the premium paid, should T-Mobile US Inc settle south of the strike at the close on Friday, Sept. 19 -- when back-month options expire.

  • S -- whose proposed merger with TMUS still awaits regulatory approval -- is down 6.6% in the wake of Iliad's counter-offer for T-Mobile. Today's negative price action only highlight's the equity's withstanding technical troubles, though, with the shares off 32.6% year-to-date to churn near $7.25. In the stock's options pits, overall volume is trading at three times what is typically seen at this point in the day, and per Sprint Corporation's 30-day at-the-money (ATM) implied volatility (IV), which has surged 37.2% to 49.8%, short-term contracts are in high demand. Specifically, the August 7 put and September 9 call have received notable attention from option traders, with both seeing buy-to-open activity.

  • LLL has plunged 14.7% today to trade at $101.96 -- sending it straight to the short-sale restricted list, and into the red on a year-to-date basis -- and, earlier, breached the century mark for the first time on an intraday basis since last October. Today's bearish gap comes amid reports the company has passed out pink slips in relation to an ongoing internal audit review. Additionally, LLL today downwardly revised its full-year earnings forecast, and tentatively declared second-quarter sales of $3.02 billion, which could be adjusted pending the results of the audit. CRT Capital was quick to chime in with a downgrade to "sell" from "fair value," and a $12 price-target cut to $90. Additionally, speculators have been rushing the stock's options pits, sending overall volume to 31 times the average intraday pace. Against this accelerated demand, the stock's 30-day ATM IV has surged 53.4% to 30.3% -- in annual-high territory. Drilling down, the two most active LLL options are the August 100 and 105 calls, where new positions are being initiated.


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