Spurred by a post-earnings rally, Verizon Communications Inc. (NYSE:VZ) has scored a decisive breakout. Thursday’s surge lifted the telecommunications company above a resistance zone that has heretofore kept a lid on its stock.
Let’s take a brief look at Verizon’s price chart to see if there’s a trade to be had.
The first thing that strikes me about the past two years in VZ is its love affair with the $50 level. Any and all attempts to depart from this zone have been futile. While shareholders haven’t enjoyed gains due to price appreciation, they have been capturing a hefty dividend, particularly in today’s low-rate environment, along the way.
Verizon stock’s dividend yield sits at a solid 4.4% these days.
While the stock has been pinned in the middle of its two-year range, Thursday’s breakout may be signaling its ready to return to the upper end of its range near $51.50.
Snatch up VZ call options on the cheap
With its earnings conference call fading in the distance, implied volatility for Verizon options has experienced the typical post-news volatility crush. The descent has brought the popular options measurement to the low end of its range.
Specifically, implied volatility sits at the 13th percentile of its 1-year range, which is a level it hasn’t descended to since last November.
In layman’s terms, VZ options are on sale — so if you’re looking for Verizon to continue its ascension, consider snatching up June call options.
Buy the Jun $50 call for $1.10. The risk is limited to the initial $1.10 cost of the trade and will be lost if VZ sits below $50 at expiration.
The reward is unlimited, allowing unfettered participation to further upside in the stock. Consider using $51.50 as your profit target since it’s the next major resistance level.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.