Unusual Options Activity: Verizon (VZ)

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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.

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  • 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.

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  • 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.

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