Verizon 'Price War' Pounds AT&T, Sprint, T-Mobile Shares

The new Verizon Unlimited plan is pressuring telecom stocks, including AT&T Inc. (T), Sprint Corp (S), and T-Mobile US Inc (TMUS)

by Alex Eppstein

Published on Feb 13, 2017 at 2:14 PM

Telecom stocks are down and options traders are busy this afternoon, after Verizon Communications Inc. (NYSE:VZ) announced an $80 unlimited data plan. According to Moffett Nathanson, "Verizon Unlimited" -- as the program is called -- could contribute to an intensified "price war" within the industry. The stock market hasn't reacted positively, either, with VZ shares last seen 0.8% lower at $48.56 -- and they're not the only ones sinking.

AT&T Options Traders Target End-of-Week Rebound

AT&T Inc. (NYSE:T) is down 1.5% at $40.77, but has still made considerable headway since putting in a bottom in mid-November around $36. Options traders aren't being deterred by today's technical hiccup, with calls crossing at 1.4 times the expected intraday rate and easily outstripping puts. Most active is the February 41 call, where buy-to-open activity appears to be taking place. In short, buyers of the near-the-money strike expect T shares to muscle back atop $41 by Friday's close, when the front-month series expires.

At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), bulls have been in control in recent weeks. Specifically, AT&T Inc's 10-day call/put volume ratio is 1.93 -- in the top one-third of all comparable readings from the past year -- with long calls roughly doubling puts. Now's a good time for options traders to purchase premium on short-term contracts, too, based on T's Schaeffer's Volatility Scorecard (SVS) of 96.

Sprint Options Traders Brace For Extended Losses

Sprint Corp (NYSE:S) has slid 1.3% to trade at $8.84, but has been on a steady trajectory higher for the past 12 months. Relative to this time a year ago, the shares have more than tripled in value. Late last month, in fact, the stock hit a two-year high of $9.65.

That said, options traders may be speculating on -- or be shareholders hedging against -- a near-term pullback. Several sweeps have seemingly been bought to open at the February 8.50 put. This echoes a trend seen in Sprint Corp's options pits lately. In the last two weeks, the stock has amassed a put/call volume ratio of 2.06 at the ISE, CBOE, and PHLX -- outstripping 92% of readings from the last 52 weeks. In fact, data from those exchanges confirms considerable buy-to-open action at the February 8.50 put, which has seen the fourth largest increase in open interest during that time frame, when surveying all S options.

T-Mobile Put Options Popular Ahead of Earnings

Finally, T-Mobile US Inc (NASDAQ:TMUS) is in focus, down 2.7% at $60.70, ahead of tomorrow morning's earnings report. Put options are flying off the shelves at three times the typical intraday clip -- even with put open interest already docked in the 99th percentile of its annual range. Narrowing the scope to options in the front three-months' series, TMUS' Schaeffer's put/call open interest ratio (SOIR) of 1.44 sits in the put-skewed 98th annual percentile.

Options traders aren't necessarily bearish toward T-Mobile US Inc, as shareholders may be hedging with pre-earnings puts. This is especially true in light of the takeover target's 66.5% year-over-year upside move. That said, if TMUS shares swing higher after earnings, a capitulation among "vanilla" option bears could translate into another positive catalyst for the telecom stock.

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