Unusual Options Activity: AT&T (T)

Shares of telecom giant AT&T (T) dropped from 52-week highs earlier in the year as the company announced it would sell off its media assets to refocus on being a telecom company. One trader is betting that shares will trend back up.

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  • That’s based on the December $30 calls. With 128 days until expiration, over 25,340 contracts traded against an open interest of 222 for a 114-fold jump in volume. The buyer of the calls paid about $0.38 to make the trade.

    With shares just under $28, they’d need to rally less than 10 percent to move in-the-money—although that kind of move is a big one for the telecom company. However, shares have traded as high as $32 back in May before the company announced it was spinning off its media assets.

    Action to take: Shares are potentially interesting depending on how they sell or spin off their media assets. Any positive news there could lead to a jump in shares, which would make the option worthwhile.

    Shares show a current dividend yield of 7.4 percent, however, the company is looking to have a lower dividend payout going forward right now. That points to a dividend trap. Nevertheless, shares could still rally from here depending on divestment news, but that’s more of a special situation than a chart pattern.

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  • For the low cost, stick to the options here, and look to sell on any good news.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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