ADT Call Options Volume Soars on Amazon News

The 10 strike has been popular among short-term ADT options traders

Sep 21, 2018 at 11:24 AM
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The shares of ADT Inc (NYSE:ADT) surged 6.6% yesterday on news the alarm company has teamed up with Amazon (AMZN) to fuse Alexa Guard with the ADT Pulse security system. The stock is extending this upside today -- last seen up 5.7% at $9.39 -- and call options volume is accelerated for a second straight day.

On Thursday, for instance, more than 2,200 ADT call options changed hands -- 3.4 times the average daily volume -- with traders buying to open the October 10 strike. Today, almost 4,000 calls have changed hands, 15 times what's typically seen at this point. The 10 strike is still popular, but it looks like speculators are purchasing new positions in the November series.

This penchant for calls is nothing new in ADT's options pits. Amid relatively low absolute volume, speculators at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 62.43 calls for every put over the last 10 sessions.

While some of this may reflect a bullish outlook, it's also possible short sellers are using options to hedge against any additional upside risk. The 36 million ADT shares currently sold short account for 33.8% of the stock's available float, or 14.5 times the average daily pace of trading. It's also likely shorts have contributed to ADT stock's recent run up the charts, as the bearish bettors scramble to cover.

Looking closer at the charts, the stock is trading well below ADT's late-January initial public offering of $14 per share, as well as its Jan. 19 open at $12.65. More recently, the $9.50-$9.60 region contained rally attempts following a mid-March bear gap, and this familiar ceiling appears to be emerging as resistance once again. Nevertheless, the shares are headed for a 10.5% weekly gain, their biggest to date.

adt stock daily chart on sept 21


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