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U.S. President Barack Obama?s statements this week supporting an open Internet spurred record volume in options that protect against declines in Time Warner Cable Inc. (TWC).
America needs ?the strongest possible rules to protect net neutrality,? Obama said Nov. 10. The comments signaled to some investors that the government will seek bigger concessions from Comcast Corp. as it tries to take over Time Warner Cable for about $45 billion, according to Macquarie Group Ltd.?s Amy Yong.
More than 57,400 contracts protecting against a drop in Time Warner Cable shares changed hands the day after Obama spoke, data compiled by Bloomberg show. That?s almost 21 times their two-year average volume. Shares of the New York-based company have trimmed their 2014 gain to 4.1 percent from as much as 14 percent in September.
?Comcast could walk away if they feel the regulatory scrutiny is so high that it would outweigh the benefits of long-term synergies,? said Yong, a Macquarie analyst in New York. The options trading reflects ?there?s more deal risk that?s being realized in the market.?
Puts hedging against a 10 percent slump cost 12.97 points more on Nov. 7 than calls pricing in a rally of the same size, according to three-month implied volatility data. That?s the highest level since the company was spun off from Time Warner Inc. in 2009, according to data compiled by Bloomberg.
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