Are Traders Betting on Verizon iPhone News?

01/10/2011 10:51 am EST

Focus: OPTIONS

With the Consumer Electronics Show (CES) wrapping up in Vegas, we’ve got a whole lot to be excited about. More iPad competitors are coming to the market, and a slew of other updates have hit the Web, but the final knockout may belong to Verizon Communications (VZ). Several tech blogs are reporting that Big Red is sending out invites to a mysterious event being held this Tuesday in New York City hosted by Verizon’s CEO, Lowell McAdam.

There’s no indication as to the purpose of the event yet, but timing is pointing towards the much-anticipated Verizon iPhone. There’s no surprise here, as the Wall Street Journal reported that AT&T (T) exclusivity would end in 2011 several months ago, but to date, there has been no official word from Apple (AAPL) or Verizon. Of course, if this is the case, AT&T stands to lose its major competitive edge, and Verizon would stand to be the beneficiary.

Overall, telecoms have underperformed the market in recent months (and years for that matter), but VZ took flight in December, perhaps as a precursor to this announcement. The stock chart shows a huge divergence, with VZ up 9% in the last month and T posting nada during the same time.


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Options volume on VZ was 40% higher than usual on Friday (volume of 117,000 versus average daily volume of 82,000) with a bias towards calls. On a typical day, there’s a call/put ratio of 1.25, and on Friday, it was over 5. The January 37 strike was the favorite of the day, which means there’s no lack of expectations that VZ will rally on the purported news.

What do you think, and what sort of options strategy would you use for this?

By Andrew Hart of BigTrends.com

Andrew Hart is the portfolio manager and editor of the ETFTRADR recommendation service, ETF Elements and the newest ETFINVESTR newsletter at BigTrends.com.

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