Wednesday, August 31, 2011

Trade of the Day: AT&T December $27/$24 ratio put spread

The Trade: 
A trader put on the December $27/$24 ratio put spread for 10,000x20,000 at a $0.16 debit, or $160,000.

AT&T was in the news today as the DOJ filed a suit to block the T-Mobile takeover. If  blocked, AT&T would pay a $3B breakup fee. AT&T dropped $1.14 and 3.85% on the day. The trader is looking for shares to continue to fall and for volatility to come back down. The $24 strike price of the put is the lowest in the December series. The trader is willing to be long at this level. Shares trade 9x earnings, 1.4x sales and 1.54x book value.

The white line in the stock chart is the level that the trader is willing to be long. AT&T traded 251,604 option contracts compared to average daily volume of 119,556.

*Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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