Shares of telecommunications company Lumen Technologies (LUMN) have risen about in-line with the overall market in the past year, but shares have been trending down in recent months. One trader sees the downtrend in shares continuing.
That’s based on the December $12 puts. With 60 days until expiration, 5,020 contracts traded hands, a 35-fold rise in volume from the prior open interest of 142. The buyer of the puts paid $0.73.
Shares currently trade around $12, making this an at-the-money trade. Shares are down about 25 percent from a 52-week high of $16 per share.
The company is currently operating at a loss, but shares trade at less than 10 times forward earnings, which have been growing slightly over the past year.
Action to take: Shares are shaping up to be a bit of a value play right here. Today’s shareholders can potentially win in a turnaround for shares, and the stock yields 8.2 percent at current prices. However, investors should wait for a turnaround in shares before buying.
For traders, this short-term put option plays well to the current downtrend in shares. It’s inexpensive, but can deliver mid-to-high double-digit returns in the coming weeks, and could do very well if the market has a large down day.
Disclosure: The author of this article has a position in the company mentioned here, and may further trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.