AT&T Option Trades Suggest 'Risk-Off' Positioning Ahead Of Next Week

AT&T Inc. T shares have performed relatively well up to this point in 2019 after dropping more than 20% over the previous five years.

AT&T stock is up 16.1% year to date, but some large bullish trades in the options market Friday morning suggest more upside could be coming.

The Trades

On Friday morning, Benzinga Pro subscribers received a series of options alerts related to AT&T.

At 9:02 a.m., a trader sold 1,000 put options with a $33.50 strike price expiring on July 5 at the bid price of 62 cents. The trade represented an $62,000 bullish bet that the stock will stay above $32.88 by the end of next week

Within a minute, there was a second large sale of the same AT&T put options with a $33.50 strike price expiring on July 5 at the bid price of 60.1 cents. The seller dumped 1,524 additional put options, a bullish bet of more than $91,592.

A final trade went through about 10 seconds later when likely the same trader sold 1,500 additional AT&T put options at a $33.50 strike price that expire on July 5. The puts were sold at the bid price of 60.5 cents and represent a roughly $90,750 bullish bet AT&T shares will stay above $32.90.

After all was said and done, the trading action represented an aggregate bullish bet of roughly $244,342 on AT&T.

See Also: How To Read And Trade An Options Alert

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively small sizes of the AT&T options trades, they are unlikely to be institutional hedges.

Risk-Off Trade?

The AT&T puts being dumped on Friday expire next week, suggesting the trader was looking at the stock on a near-term basis. The biggest potential market catalyst between now and next Friday is the G-20 summit, where U.S. President Donald Trump is expected to meet with Chinese President Xi Jinping on this weekend to discuss a potential trade deal between the two nations.

Given AT&T’s relatively stable business and its extremely high dividend yield of 6.1%, the stock falls under the category of a “risk-off” investment when it comes to geopolitical news. In other words, AT&T is a relative safe haven for stock market investors if things should go south between Xi and Trump over the weekend. Friday’s trader may have low expectations for the trade talks, or the trader may believe a deal between the U.S. and China will lift all stocks, AT&T included.

AT&T's stock traded around $33.32 per share at time of publication.

Photo by Luismt94/Wikimedia.