IB Options Brief: Verizon Communications, Inc. (VZ) & AT&T, Inc. (T)
VZ – Verizon Communications, Inc. – Bearish options activity on wireless provider, Verizon Communications, at the start of the session suggests one strategist is bracing for a bumpy fourth quarter. The stock is down 0.65% at $46.27 as of 11:55 a.m. in New York, with six full trading sessions to go before the company reports third-quarter earnings next Thursday.
The largest transaction in VZ options printed within the first 15 minutes of the opening bell in the December expiry puts. It looks like one strategist purchased a 5,000-lot Dec. $41/$45 bear put spread for a net premium of $0.58 per contract. The position may be a sizable outright bearish bet that shares in Verizon are likely to decline in the next few months, or could be a hedge to protect the value of a long position in the stock.
The trade makes money if shares in VZ drop 4% from the current price to breach the effective breakeven point at $44.42, with maximum potential profits of $3.42 per contract available on the spread provided shares decline 11% to $41.00 by December expiration.
T – AT&T, Inc. – Interesting, one minute after the 5,000-lot bear put spread traded in December expiry put options on Verizon Communications, Inc. (see snippet on VZ), a similar options combo transaction printed in AT&T puts expiring December of this year, as well. The put spread on AT&T also looks for shares in the name to potentially drop roughly 11% by year end.
Shares in AT&T are fairing slightly worse than Verizon at present, down 0.90% to stand at $37.33 as of 12:10 p.m. ET. AT&T reports its third-quarter earnings on October 24th prior to the open, the week following Verizon’s announcement.
The strategist behind the 5,000-lot Dec. $33/$37 put spread on AT&T today paid a net premium of $0.66 per contract and stands ready to make money on the downside should shares in the name slip 2.7% to breach the effective breakeven price of $36.34. Maximum potential profits of $3.34 per contract are available on the spread should shares in the communications company drop more than 11% to trade below $33.00 at expiration in December.
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