Shares of telecom company Verizon (VZ) have been in a downtrend in recent weeks. However, one trader sees shares bouncing higher in the next month.
That’s based on the February $57 calls. Over 21,050 contracts traded, a 152-fold rise in volume from the prior open interest of 138. With 29 days to expire, the trade is right at-the-money, as shares recently dipped under $57. The option buyer paid $1.24 on average.
Shares of the telecom are down about 5 percent over the past year, as revenues have slightly declined and earnings have also dropped as well. However, the company is still profitable and trades at 12 times forward earnings.
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Action to take: With just under a month left on the trade, this option is a bet on a quick bounce higher in shares. The recent decline has sent shares down to their 200-day moving average, so a bounce is likely on a technical basis in the next few weeks.
Traders could fare well with this options trade, which could deliver a high-double to low-triple-digit profit depending on the size and speed of a bounce higher. Traders should look for a short-term bounce back to the 50-day moving average near $59 per share.
Investors may also like shares here, as the drop in price has pushed the dividend yield to 4.4 percent.