Unusual Options Activity: AT&T (T)

Shares of telecom giant AT&T (T) have slid over 20 percent in the past year. One trader sees the potential for a rebound in the coming weeks.

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  • That’s based on the April 22nd $25.50 calls. With 37 days left until expiration, 5,437 contracts traded compared to an open interest of 125, for a 44-fold rise in volume. The buyer of the calls paid $0.16 to make the trade.

    Shares last traded near $23, so shares would need to rise just over 10 percent in order for the option contract to close in-the-money. That would still leave shares well under the stock’s 52-week high near $34 per share.

    Revenue is down 10 percent over the past year as well, and shares have been down as the company has announced plans to divest of its media holdings, which it just spent several years acquiring.

    Action to take: Investors may like shares here, given how oversold they’ve become in the past few months. The company recently reduced its dividend, but at current prices, a rebound in shares will lead to the majority of returns from here.

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  • For traders, the options are an inexpensive way to play a potential rebound in shares in the coming weeks. Traders can likely nab mid-double-digit gains, but should look to take profits quickly on any move higher in shares.

     

    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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