Verizon Communications Inc. (
) saw a surge in option activity on Monday, with roughly 98,000
contracts exchanged -- triple the communication concern's expected
daily option volume. Traders showed a distinct taste for VZ calls,
with 75,000 contracts crossing the tape on the session.
Monday's preference for calls is in line with the recent trend
on the International Securities Exchange (ISE) and Chicago Board
Options Exchange (
). During the past two weeks, traders on these exchanges have
bought to open 4.3 VZ calls for every put purchased, a ratio which
ranks above 90% of all other readings taken during the past 12
months. This elevated ratio indicates that speculators on the ISE
and CBOE have initiated bullish bets on VZ at a much faster pace
than usual lately.
However, VZ's Schaeffer's put/call open interest ratio (SOIR) --
which measures put open interest relative to call open interest in
the front three months -- checks in at 1.31, in the
74th annual percentile. In other words, there is still plenty of
room for optimism to continue to grow in the options arena.
However, it's possible that these out-of-the-money puts have been
open for some time as LEAPS -- which could be skewing VZ's SOIR
toward the bearish end of the spectrum.
Option players looked ahead to the February series on Monday,
with the February 36 call being a popular choice. This strike saw
volume of 7,000 contracts change hands -- the majority of which
crossed at the ask price, suggesting that these calls were likely
purchased. Open interest increased by 2,633 contracts overnight,
confirming that fresh positions were added at this back-month
strike. By buying to open VZ's February 36 call, option players are
counting on the stock to rally above the $36 level over the next
In fact, on Monday VZ
rally above the $36 level, tagging a fresh high of $36.45. The
equity has continued this trend today, hitting a brand-new annual
peak of $36.66 out of the gate this morning. Technically speaking,
VZ has been trending steadily higher since the beginning of
December along the support of its 10-day moving average.
In addition to its strong technical backdrop, VZ's fundamental
forecast is also looking quite sunny. On Monday, Piper Jaffray
analyst Gene Munster sounded off on Apple Inc. (
), the iPhone, and Verizon. Munster said that he sees the launch of
an iPhone compatible with Verizon as a "95%" certainty in March of
2011 -- an event that many VZ customers have been holding out
With VZ's technical -- and fundamental -- picture looking pretty
bright, we could see the recent trend toward call buying continue.
As more bulls flock to VZ's camp, the resulting buying pressure
could help the communications issue extend its quest for new