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Sprint Corporation (S) Option Traders Eye a Continued Advance

Are Sprint Corporation short sellers hedging their bearish bets?

by 2/13/2014 11:26 AM
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Option Brief: Sprint Corporation (NYSE:S) is up nearly 4.6% today, after the head of SoftBank Corp. -- S' majority shareholder -- said the Kansas-based telecom concern needs "a change in mindset." Against this upbeat price action, call volume has more than tripled average intraday levels, and a handful of option traders are betting on a quick move higher in the near term.

The most active strike thus far is the February 9 call, where 6,224 contracts have changed hands -- almost all at the ask price -- and implied volatility (IV) has jumped 2.4 percentage points, pointing to buy-to-open activity. The options market isn't too confident this call will be in the money at next Friday's close, which is when front-month options expire, as the delta for the option is docked at a slim 0.23, or 23%.

Also garnering notable attention are S' weekly 2/14 and February 8.50-strike calls. The former has seen 3,829 contracts cross the tape, including one large block of 3,000 that went off closer to the ask price. IV shot 12.5 percentage points higher at the transaction, hinting at the initiation of new bullish positions. Meanwhile, the majority of the 2,349 contracts that have traded at the further-dated strike have also gone off on the ask side, and volume outstrips open interest, suggesting that some of these positions have been bought to open.

On the charts, Sprint Corporation (NYSE:S) has had a dreary start to the year, with the shares down 21.4% to linger near $8.44. However, today's upward momentum follows in the footsteps of this week's trend, with the stock heading higher in the wake of Tuesday morning's well-received quarterly earnings report. With short interest accounting for 8.5% of the stock's available float, a portion of today's out-of-the-money call buying could be at the hands of short sellers hedging against any additional upside.


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