Shares of media giant Paramount Global (PARA) have shed one-third of their value in the past year. One trader sees shares moving higher in the weeks ahead.
That’s based on the February 17 $21.50 call. With 22 days until expiration, 3,066 contracts traded compared to a prior open interest of 114, for a 27-fold rise in volume on the trade. The buyer of the calls paid $0.97 to make the trade.
Shares recently traded just under $21, so they’d need to rise about 3 percent in order for the option to move in-the-money. The option strike price is still well under the stock’s 52-week high of $39.21 per share.
Although the stock took a dive, revenues rose by about 5 percent last year. Plus, Paramount trades for just under 5 times earnings, and shares trade for about 0.6 times their price-to-book value. That suggests that shares are undervalued here.
Action to take: Investors interested in a media play may like shares at current prices. In addition to being a value play, the stock offers buyers a 4.5 percent dividend yield, with a low payout ratio.
For traders, shares have been in a short-term uptrend in the past few weeks. That suggests that the February calls may deliver mid-to-high double-digit gains before expiration. Traders may want to take quick profits on a jump higher in shares in the coming days.
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.