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T-Mobile US, Inc. (NASDAQ:TMUS) has not participated in the recent market pullback, expanding to a new year-to-date high of $24.30 in today's trading. In fact, over the last 40 trading sessions, the shares have outperformed the S&P 500 Index (SPX) -- on a relative-strength basis -- by more than 41 percentage points. One option speculator -- who has already benefited from T-Mobile's march higher -- is taking some profits and applying them to a new, more aggressive bullish bet.
Within the first hour of today's session, one block of 10,000 calls at the August 24 strike was evidently sold to close near the bid price at $1.52 per contract. According to Trade-Alert data, this exited a position that was opened on June 14 for $1.05 per contract.
Having secured $0.47 per contract -- or nearly 45% -- in profits over less than two weeks, this trader got slightly more ambitious. At the same time this block was closed, two other large blocks totaling 11,000 contracts crossed at the out-of-the-money August 26 strike, each trading off the ask for a volume-weighted average price (VWAP) of $0.86.
In order for the newly purchased calls to be in profitable territory at expiration, TMUS needs to be trading north of the $26.86 level (strike price plus the VWAP) on August 16 when the option expires. While this is 11.1% above the stock's current price of $24.17, TMUS has gained 12.8% in June, so a move of this magnitude is not out of the question.
What's more, Schaeffer's Volatility Scorecard (SVS) of 92 means that TMUS options are attractively priced, relative to the likelihood of a dramatic move on the charts. Delta on the August 26 call stands at 0.39, or 39%, giving the call around a 2-in-5 chance at being in the money by the time expiration rolls around. (Note, however, that delta changes throughout the day based on the stock's price action and other factors.)
On a broader scale, T-Mobile US, Inc. (NASDAQ:TMUS) has been a favorite among bullish options speculators of late. During the past 10 days, more than 13,600 calls have been bought to open on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), versus fewer than 400 puts.
Wall Street is also (slowly) warming up to the stock, but the potential for upgrades and price-target hikes still looms. Currently, 12 of the 19 brokerage firms following the security have named it a "hold" or worse, and the consensus 12-month price target of $21.06 is actually a discount to current levels. Any votes of confidence from the brokerage contingent could help lift today's option bull into profitable territory ... again.