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Sprint Corporation Post-Merger Price Action Attracts Bulls


Sprint has been targeted by both call and put players.

Sprint Corporation (NYSE:S) has been keeping a low profile following its early July spin-off from the merger of Sprint Nextel Corporation and SoftBank Corp. Despite the lack of notable headlines, the stock has been making its way quietly up the charts, tacking on more than 18% from its July 8 opening of $5.65. Unlike sector peer AT&T Inc. (NYSE:T), option traders from both sides of the fence have been taking note of this positive price action, and have been bullishly aligning themselves toward S in recent weeks.

Jumping right in... At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 8,408 calls during the past 10 sessions, compared to 1,125 puts, resulting in a call/put volume ratio of 7.47. This is a marked rise from the Aug. 1 reading of 2.05.

This call-skewed trend is echoed in the stock's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.49, which shows that near-the-money call open interest more than doubles put open interest among options expiring in the next three months. In the front-month series, this has translated into heavy accumulations of call open interest at the September 6 and 7 strikes, where a respective 35,370 and 22,747 contracts currently reside.

Meanwhile, put players have also been taking a neutral-to-bullish stance on S in recent weeks. Throughout the last 20 sessions, traders at the ISE, CBOE, and PHLX, have sold to open 7.38 times as many puts as they've bought to open. Digging deeper into the data shows that a number of short positions have been initiated at the September 6 strike -- home to peak put open interest in the front-month series. Based on S' current perch at $6.91, these put writers expect the $6 mark to hold as support through the close on Sept. 20.

Outside of the options pits, sentiment is a little less optimistic. For starters, short interest soared 46.7% during the latest reporting period. Additionally, roughly 78% of covering analysts maintain a "hold" or worse suggestion toward the stock, and the consensus 12-month price target of $6.76 stands at a discount to present trading levels.

This article by Karee Venema was originally published on Schaeffer's Investment Research.

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