Telecom operator AT&T (T) is down 13 percent over the past year, but shares are trending higher following strong earnings. One trader sees further upside in the coming weeks.
That’s based on the March $19 calls. With 38 days until expiration, 323,242 contracts traded compared to a prior open interest of 1,536, for a massive 210-fold surge in volume on the trade. The buyer of the calls paid $0.19 to make the bullish bet.
AT&T shares recently traded for about $18, so they would need to rise about 5.5 percent in the coming weeks. The strike price is under AT&T’s 52-week high of $20.49.
The telecom has struggled in recent years, but is focusing on profitability. Revenues are up 2 percent over the past year, and the company has managed to increase its profit margin close to 12 percent.
Shares now trade at less than 8 times forward earnings.
Action to take: Investors may like shares at current prices or on any drop lower. Besides being in an uptrend, AT&T pays a sizeable 6.3 percent dividend at current prices.
For traders, the $19 calls are inexpensive enough to see high-double or low-triple-digit returns in the coming weeks.
Traders may want to take a quick profit on any further move higher in AT&T shares before they get overbought.
Disclosure: The author of this article has a position in the company mentioned here, but may further trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.