Shares of telecom company AT&T (T) are down about 22 percent over the past year and have been sliding to new 52-week lows in recent sessions. One trader sees a rebound for shares in the coming weeks.
That’s based on the November 18 $14 calls. With 36 days until expiration, 10,033 contracts traded compared to a prior open interest of 157, for a 64-fold rise in volume on the trade. The buyer of the calls paid $1.21 to make the bullish bet.
The stock trades in the high $14 range, making this a slightly in-the-money call option. Shares are well off their 52-week highs of $21.53.
Revenue is off 17 percent at the company, but earnings are up nearly 165 percent in the past year, as AT&T has been selling off non-core assets. However, as a telecom, revenue should stabilize over time. And the company has some ability to raise its rates higher than inflation.
Action to take: Shares are trading at high levels of pessimism, with shares going for 6 times earnings off of a high of 189 times last year. Plus, AT&T pays a high dividend yield, of about 7.5 percent at the moment.
For traders, there’s no sign that shares will rebound in the next few weeks. But the November calls could deliver a quick mid-double-digit gain on a bounce in shares. Given how oversold the market is as a whole, there’s a good chance of such a bounce in the coming weeks. Just look to take a quick profit rather than grab the biggest one possible.
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.