AT&T Options (T): Unusual Trading Activity
Options in telecommunications company AT&T (T) are showing large options activity today.
Since AT&T reported earnings back on April 24th, the stock has been moving up in a straight line.
In fact, after its earnings, the stock soared to a new high of $33.30 before leveling off. And today it’s holding steady around $33.00 a share.
What’s interesting is that option traders seem to be thinking T is bound for another breakout to the upside.
Why do I think this?
Simple… one very large option trade.
As I just mentioned, AT&T’s down a few pennies at $33.01.
Yet, even though the stock is down, option activity is up.
Our tracking system picked up a large short call spread (bear call spread) yesterday, which traders are still trading today.
A trader sold 15,400 T July $32 strike call options for an average price of $1.44 a piece. Immediately following, the trader bought 15,400 T July $34 strike calls for a price of $0.37 a piece.
What we’re looking at here is an option trader that brought in a credit of $1,647,800.
But here’s the kicker… he needs AT&T’s stock to move lower and trade below $32.00 a share by July expiration. If successful, he’ll keep this enormous amount of money as pure profit.
So, what’s going on here?
As most of you know, AT&T is the second-largest US wireless carrier. It serves over 89 million customers and 12 million “connected devices” such as e-readers.
AT&T is also the dominant local phone company in 22 states, serving about 40 million phone lines, 16 million Internet users, and 4 million television customers.
In addition, it provides phone and data services, such as Web hosting and data transport to large businesses nationwide.
I think this large call activity is just another large institution or hedge fund thinking T, along with the broad market, is getting a little toppy.
No matter what the earnings report said, AT&T’s heavy reliance on the iPhone is still an issue.
About 30% of its retail customers use this device, and the company’s reputation has taken a hit as data-hungry users have clogged networks in some areas. These customers could be ripe for defection from the AT&T network.
Also, a large portion of its revenue and cash flow still comes from fixed-line local and long-distance phone services. However, this business is under increasing attack from competitors such as Sprint (S) and Verizon (VZ).
Bottom line… T looks strong now, but that could change in the near future.
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Category: Unusual Options Trading Activity
