EOT Trade Alert – February 25, 2010

Corey Williams | February 25, 2010

February 25, 2010

Trade Alert:

Buy VZ July 17 2010 $30 Calls at $0.65 or better

Company Background:

Verizon Communications (VZ) provides wireline and wireless communications services in the US and 150 other countries. The wireless segment is a joint venture with European-based Vodafone (VOD).

Short-Term Catalyst:

I’m going to keep this one short and sweet. This is purely a technical play based on VZ’s chart patterns for the last ten years.

Verizon is a massive $82 billion market cap communications company. It’s a ‘steady as she goes’ stock. And it kicks off an annual dividend of $1.90 for a yield of 6.56%.

Right now, VZ is trading under $29. VZ’s only dipped below this price level a handful of times in the past ten years. And every time it reaches or dips below this level, it rebounds up into the mid $30s or higher.

Over the last year, the stock’s bounced between $28.50 and $33 three times. I think VZ is going to head back toward $33 over the next few months.

I’ve found an option that looks undervalued to me. Let’s grab these options before VZ rebounds.

Trade Details:

Underlying Stock Symbol:	VZ
Current Bid-Ask Price:	$0.57 – $0.59
Option “Buy Up To” Price:	$0.65
Break-Even On Stock At Expiration:	$30.65
Maximum Risk Per Contract:	$65

Exit Strategy:

VZ is trading at $28.71 per share. Resistance levels will be at $31.25 and again at $33. Remember, we want this stock to move higher. Support levels will be at $28 and $27. Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.

Chart: