Bears Pounce On AT&T Inc. (T) Amid Dow Shake-Up

AT&T Inc. (T) will be removed from the Dow Jones Industrial Average this month

by

Published on Mar 6, 2015 at 10:44 AM
Updated on Apr 20, 2015 at 5:32 PM

Major news hit the wires earlier, when it was announced that AT&T Inc. (NYSE:T) will be replaced on the Dow Jones Industrial Average by Apple Inc. (NASDAQ:AAPL) after the close on Wednesday, March 18. As such, T shares are 1.4% lower today at $33.54, and option bears are gambling on additional downside.

Diving right in, speculators are honing in on the 33 strike. Specifically, buy-to-open activity may be transpiring at the March 33 and April 33 puts, as traders expect T will breach the strike by the respective expiration dates. Historically speaking, though, the shares haven't closed below $33 since Jan. 30. As such, delta on the front-month option is just negative 0.31, while delta on the back-month put is negative 0.48.

Looking more closely at the options pits, huge accumulations of put open interest are found at the March 33.50 and 33 strikes. As expiration approaches, an unwinding of the hedges related to these positions could provide support for T.

Should the shares bounce from either of those strikes, the brokerage bunch may decide to shift gears. Fifteen of the 22 analysts covering AT&T Inc. (NYSE:T) have given it a tepid "hold" rating, while the stock's consensus 12-month price target of $34.19 stands at a slim 2% premium to current trading levels. A round of upgrades and/or price-target hikes could intensify buying power on T.


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