Berkshire Takes Billion-Dollar Stake in VZ, Stock Pops

The equity just toppled long-time pressure at its 20-day moving average

Deputy Editor
Feb 17, 2021 at 1:26 PM
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The shares of Verizon Communications Inc. (NYSE:VZ) are up 4.1% at $56.42 after Warren Buffett's Berkshire Hathaway (BRK) added 147 million of Verizon's shares to its holdings, taking a $8.6 billion stake, in the fourth quarter. Below, we'll dig into VZ's technical setup leading up to today's news, as well as the flurry of options activity occurring in the stock's options pits today.

After closing at $61.83 on Dec. 3 -- its highest close since late December 2019 -- the equity began tumbling on the charts. In fact, yesterday's session saw Verizon stock fall to its lowest level since July 9. Now, after guiding the security lower for nearly all of 2021, the 20-day moving average could become a potential area of support.

VZ Chart February 17

This positive price action has options bulls charging toward the equity. So far today, over 185,000 calls have crossed the tape -- five times the average intraday volume, and more than six times the number of puts traded. Most popular is the March 57.50 call, followed by the February 57 call, with positions being opened at both. This suggests these traders are speculating on a lot more upside for VZ by the time these contracts expire. 

This penchant for bullish bets is nothing new. In fact, Verizon stock sports a 50-day call/put volume ratio of 5.46 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than all but 1% of readings in its annual range. This suggests a heavier-than-usual appetite for long calls of late. Echoing this, HLT’s Schaeffer's put/call open interest ratio (SOIR) ratio stands higher than just 4% of readings from the past 12 months, indicating short-term option traders have rarely been more call-biased.

For those wanting to speculate on VZ's next move, options look like a prudent play at the moment. The equity's Schaeffer's Volatility Index (SVI) of 18% is higher than just 5% of readings from the past year, which implies that the options market is pricing in relatively low volatility expectations right now. 

 

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