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Big bet on Verizon is a hedge against 'disaster’

Options Action: Hang up on Verizon?

Verizon has fallen more than 5 percent year to date, and one trader appears to be betting on another big tumble for the stock in the next month.

Specifically, the trader bought 12,500 Verizon November 42-strike puts for 32 cents each, a $400,000 bet that the stock falls 5 percent by November expiration.

Dan Nathan of RiskReversal.com said the trade could be a "disaster hedge against a long position" in the stock.

"The year-to-date chart is in a massive downtrend," Nathan said Wednesday on CNBC's "Fast Money." "We're obviously coming up against some really important long-term support" around $40.

Third-quarter earnings for the telecommunications company are also approaching, with Verizon scheduled to report before the bell Oct. 20.

In a September release, Verizon said full-year 2016 earnings may be flat compared to 2015 due to short-term impacts such as the sale of operations to Frontier Communications, as well as a push into the wireless video and "Internet of Things" space.

Still, about half the analysts who cover Verizon's stock are bullish, according to FactSet, with an average price target of $50.75.