Telecom and internet stocks are in focus today, with the Federal Communications Commission (FCC) expected to vote to repeal Obama-era net neutrality rules. The landmark ruling could lead to sweeping deregulation of the telecom and cable industry. If the Commission — comprised of a Republican majority — votes to walk back the rules today, it would be considered a victory for big telecom companies like AT&T (T) and Verizon Communications Inc. (NYSE:VZ).
Verizon Stock is Overbought
Verizon shares have had roller-coaster year, but have added more than 18.5% in the past month, and are close to being in positive year-to-date territory for the first time since January. Even despite the expected FCC vote — which is just a formality — VZ stock is down 0.9% at $52.44 today, after HSBC downgraded the telecom giant to “hold” from “buy.” However, with a 14-day Relative Strength Index (RSI) of 73 — in overbought territory — today’s breather may have been in the short-term cards for VZ.
Options Volume Pops
Today, options volume has picked up ahead of the net neutrality vote. Over 55,000 contracts have been traded — two times what’s typically seen at this point in the day, and pacing for the 97th percentile of its annual range. The most popular trade is the January 2018 48-strike put, with over 10,000 contracts exchanged. Digging deeper, simultaneous blocks of 5,000 contracts traded at the aforementioned out-of-the-money put and January 2018 48-strike call, and Trade-Alert flagged them as tied to shares.
Taking a step back, short-term traders have been starting to lean toward VZ puts over calls by a wider-than-usual margin. The security has a Schaeffer’s put/call open interest ratio (SOIR) of 0.97, a ratio that ranks in the 88th annual percentile.
Digging deeper, however, shows the March 52.50-strike call with the biggest rise in open interest during the past 10 days, with nearly 14,000 contracts added. Data from the major options exchanges shows a notable skew toward buy-to-open activity at this strike, with “vanilla” traders expecting the stock to continue north of this strike into the first quarter of 2018.
VZ Has Rewarded Premium Buyers
Whether bullish or bearish, VZ options buyers should note that the equity’s Schaeffer’s Volatility Scorecard (SVS) is docked at a lofty 90. In other words, Verizon stock has consistently rewarded premium buyers over the past 12 months by making bigger-than-expected moves on the charts.
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