Telecom Stock Set to Surge Even Higher

Near-term ATUS option traders are pricing in extremely low volatility expectations at the moment

Sep 2, 2020 at 11:57 AM
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Telecom concern Altice USA Inc (NYSE:ATUS) recently broke out of a long-term weekly downtrend, and is now breaking out of a bull flag pattern. Plus, a confluence of moving averages just below the equity should be supportive after previously putting a cap on attempts at a rally. With this amount of support in place, now is the prime opportunity to buy ATUS calls.

ATUS Chart August 28

Despite this impressive price action, short interest is at an all-time and rising. In fact, short interest is up nearly 18% in the last two reporting periods, and the shares sold short still account for 7.5% of the stock's total available float. In other words, it would take over six days to cover these bearish bets, at ATUS' average pace of daily trading. Should some of this pent-up pessimism begin to retreat, shorts covering their bearish bets could provide additional tailwinds for the telecom name.

Lastly, the equity's Schaeffer's Volatility Index (SVI) of 29% stands in the 4th percentile of its annual range, implying near-term option traders are pricing in extremely low volatility expectations right now.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this ATUS commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.


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