Timing a short squeeze can be tricky. Jump in too soon and you could be sitting on dead money until management improves its outlook. Wait too long and you risk missing most of the upside.

The most unloved companies are usually unloved for a reason — whether thanks to declining sales or some other fundamental weakness. But when sentiment turns, the rush to cover short positions can provide swift profits for the well-positioned bull.

One of the most unloved companies in the market could be coming up on an inflection point. It’s a leader in its industry but has been plagued by customer attrition over the past couple of years. Management has big plans for next year, though, saying the company should start booking a net gain in customers again. As a result, sentiment could be about to take a bullish turn.

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The Tide Could Turn For This Unloved Leader In 2016

Only three other stocks in the S&P 500 are more heavily shorted than ADT Corporation (NYSE: ADT), which has 24.5% of its shares held short in the market. GameStop (NYSE: GME) almost perpetually tops this list as investors remain convinced it can’t win over the trend in digital games. Meanwhile, Transocean (NYSE: RIG) and Chesapeake Energy (NYSE: CHK) have fallen victim to the plunge in oil prices.

With 41.3 million shares of ADT borrowed and sold short, it would take more than 20 days to unwind the positions on the average daily volume of 2 million shares — or just one massive short squeeze could send the stock screaming higher.

ADT was spun off from Tyco (NYSE: TYC) in late 2012 and is the leader in North American home monitoring services with 6.7 million residential and business customers. The company has a dominant position in a highly fragmented market, controlling 27% against only 4% for its next closest competitor. Its scale and market position help drive profitability and present the opportunity to steal customers from smaller rivals. 

ADT has almost completed phase one of its growth plan, expanding into the $8 billion light commercial market with its signature Pulse program. Next year, it plans on moving into phase two and the $13.8 billion mid-market commercial segment, significantly increasing revenue.

Loss of customers has been the biggest hurdle for ADT as telecom and cable companies like AT&T (NYSE: T) and Comcast (NASDAQ: CMCSA) moved into the market over the past few years. Net customer losses were 140,000 last year but shrank to just 38,000 over the first three quarters of 2015. Management expects a net subscriber increase next year, which could lead to a big boost in investor sentiment. 

Institutional investors are already positioned for a big move in the company, holding the vast majority of shares outstanding. 

A portion of ADT’s shorted shares are likely institutional owners that want to maintain their investment in the company but are protecting the position until the outlook improves. When that outlook improves, money managers will step in to close short positions to take advantage of a strong growth story.

In light of the outlook for growth next year, I expect ADT to increase its share repurchase program over the coming quarters. The company aggressively bought shares over the past two years, buying back more than $2.6 billion, but slowed repurchases this year to pay down debt. Free cash flow of nearly $800 million a year and a strong outlook could justify a bigger cash return to shareholders, further improving sentiment. 

Collect Instant Cash While We Wait For A Short Squeeze

Private equity firm Apollo Capital Management purchased smaller competitors Protection 1 and ASG Security earlier this year for nearly $2 billion — four times annual sales of $500 million. 

ADT is expected to post sales of $3.58 billion for full-year 2015, ending in September, and trades at just 1.5 times sales. I’m not predicting a buyout by any of its institutional investors, but shares are trading at a very attractive level given the company’s market domination and scale.  

Rather than simply buying the stock, I am going to use an entry-level options strategy that allows average investors to pocket hundreds of extra dollars each month. Before you bail at the mention of options, let me tell you that this is a simple, conservative strategy. In fact, it’s so simple it can be explained in 90 seconds.

If you’re not familiar with selling covered calls, I urge you to watch this three-minute presentation before taking advantage of today’s trading opportunity. In it, you’ll learn how this strategy can be used to make up to an extra $3,000 a month. Click here to access it.

With ADT trading at $32.78 at the time of this writing, we can buy the stock in 100-share lots and simultaneously sell one ADT Oct 34 Call for every 100 shares purchased. These calls are trading around $0.86 ($86 per contract). 

We collect this income immediately, lowering our net cost to $31.89 per share. So not only do we get to purchase shares at a 2.7% discount to the recent price, but the premium we collect amounts to an instant cash yield on the shares. 

If ADT closes above the $34 strike price at expiration on Oct. 16, our shares will be sold for that price. In this case, we will make $2.11 for a profit of 6.6% in just 47 days. That amounts to a 51% annualized gain. 

The October calls give us a chance to collect the premium before the next earnings report, which is scheduled for around Nov. 10. Management’s guidance for 2016 could present a strong upside catalyst and potentially spawn a massive short squeeze as positions get bought back. 

If ADT fails to rally above $34 by expiration, we can sell another call option on the position to generate more income while we wait for the shorts to get shaken out. 

This same strategy has delivered:

— An 11.9% gain in 32 days — 135% annualized
— A 17% gain in 25 days — 247% annualized
— A 25% gain in 44 days — 209% annualized

Click here to find out how you can use it to start generating hundreds of dollars this week.

This article was originally published on ProfitableTrading.com: Why I’m Bullish on the 4th Most Hated Stock