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Option Brief: T-Mobile US Inc (NYSE:TMUS) call volume is running at breakneck pace today, with over 22,000 contracts traded -- about a six-fold markup to the typical intraday volume. By far the most active option is the January 2014 28-strike call, which has seen 16,326 contracts cross the tape, including a 10,844-lot. Nine out of every 10 calls traded off the ask price, suggesting they were purchased. Meanwhile, implied volatility has spiked nearly 7 percentage points at this strike, and data from the International Securities Exchange (ISE) and Trade-Alert confirms the creation of new long positions.
By buying the calls, today's speculators are betting that TMUS will advance past the strike price by options expiration, roughly two months from now. From the stock's current price of $26.02, that's a move of 7.6% -- and it would partially offset the shares' tumble since reporting a third-quarter earnings miss on Nov. 5 (the shares also touched a two-year high of $29.50 on that day). If the rally doesn't materialize, however, the most the call buyers will forfeit is the initial premium paid.
Year-to-date, T-Mobile US Inc (NYSE:TMUS) has gained around 31%, slightly outpacing the broader S&P 500 Index (SPX), so strong price action isn't inconceivable. In fact, delta on the call is currently docked at 0.35, or 35%, representing a better than 1-in-3 chance the option is in the money at expiration. However, TMUS shares are staring up at several potential layers of technical resistance, including the stock's 10- and 50-day moving averages, and the $26.50 level, which hasn't been surmounted in the past week.