Shares of communications firm AT&T (T) have been in a downtrend for most of the year. However, one trader sees the possibility for a short-term rebound in shares.
That’s based on the January 28th $22 call options. With 42 days until expiration, 5,207 contracts traded against a prior open interest of 253, for a 21-fold rise in volume. The buyer of the calls paid $0.77 to make the trade.
The company has shed 25 percent over the past year as management has decided to sell off media assets that the company spent the prior few years building up instead. Those asset sales will be used to pay down debt.
Action to take: Earnings are up over 111 percent in the past year, and asset sales could fuel a few moves higher in shares.
The stock currently pays out a yield close to 9.3 percent, but a dividend cut is in the offering and is one of many reasons for the decline in shares. Buyers now could fare well depending on what the asset sales bring in, although those moves will likely be short-term at best.
In the short-term shares look heavily oversold. These January calls are slightly in-the-money based on the recent price of shares, and as such could yield high double-digit gains on a significant rally higher.
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.