Shares of telecom company Verizon (VZ) have been trading in a narrow range over the past year. One trader sees shares moving higher, possibly back to the top of their trading range, if not higher.
That’s based on the September $50 calls. Over 10,000 contracts traded against a prior open interest of 336, for a 30-fold rise in volume. The buyer of the options paid about $6.75 to make the trade.
Shares of Verizon last traded near $56.50, leaving this option about $6.50 in-the-money, meaning the total premium paid for the option to make the trade is low.
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However, with a 52-week high of $62, the option would only be worth about $12 should shares move back to that 52-week high, just under a potential double.
Overall, the telecom’s shares have traded flat over the past year, but the company trades at 11 times earnings and looks like a reasonable value play in today’s markets near all-time highs.
Action to take: Shares currently yield 4.46 percent, an attractive starting dividend. However, as a heavily regulated telecom, the dividend growth is quite low. But for investors looking for current income, shares look attractive.
For traders, this option trade looks attractive. It has two months to play out, and being in-the-money already reduces the possibility of a total loss on the option. It also helps that shares have been trending slightly higher in recent weeks.
Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.