Consolidation in the telecommunications and pay-TV markets has put the two industries in flux. We’ve seen mega-mergers like the tie-up between AT&T (NYSE: T) and DirectTV approved while others have been thwarted. 

A big deal may be coming soon that could translate to strong upside for a beaten-down leader in the pay-TV market over the next few months.

Dish Adapting To The Changing TV Landscape

Shares of Dish Network (Nasdaq: DISH) fell this week even though the satellite TV provider reported a better-than-expected 35% jump in Q3 earnings year over year. Sales came in below expectations, though, and subscribers continued to decline. The company reported a net loss of 23,000 subscribers in the quarter — nearly double the loss posted a year ago. 

With many viewers “cutting the cord” and shifting to over-the-top Internet-based products, Dish launched its Sling service in February. This Internet-based service offers live streaming of more than 30 premium channels. 

While the company doesn’t break out the number of satellite versus Sling subscribers, UBS (NYSE: UBS) analyst John Hodulik said it likely lost 173,000 satellite TV customers in the third quarter while adding 150,000 Sling subscribers.

Adapting to the changing TV viewing landscape is important to the success of the company, but there is another reason Dish should be on your radar right now.

Spectrum Stockpile Could Be A Precious Commodity

Dish Network has been buying up wireless spectrum since 2008, amassing $50 billion in airwave assets. Since the company isn’t a wireless carrier, it hasn’t been using the spectrum — yet.

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According to Bloomberg, CEO Charlie Ergen’s plan is “to shift from a satellite-TV provider in decline to a formidable wireless network operator that will compete with Verizon Communications Inc. and AT&T Inc. in services like mobile video.”

This strategy hit a snag when two Dish affiliates had to surrender their claims on $3.3 billion in licenses won at auction after the Federal Communications Commission (FCC) denied them a small-business discount. Dish said it didn’t break any rules, asking for the decision to be overturned in the U.S. Court of Appeals. Arguments are due in early 2016.

When addressing the FCC decision on an Aug. 5 conference call, Ergen mentioned the possibly of splitting the company into a satellite TV business and a wireless business whose airwaves could be sold or leased with some tax advantages.

The spectrum held by Dish could become a precious commodity. Analysts expect Verizon Communications (NYSE: VZ) to run out of wireless spectrum within two to three years as the nation’s largest carrier adds subscribers. And other carriers will likely face the same issue. 

Verizon CEO Lowell McAdam has acknowledged talks with Dish management on several options, including leasing the wireless spectrum, partnering with the satellite provider to bundle services or just buying the spectrum outright.

Whatever the outcome of the FCC appeal, Dish has several attractive options for its spectrum stockpile. I expect management to make an announcement about its plans in early 2016, if not sooner. This should lift uncertainty and boost shares. 

Book A 13% Return While You Wait For A Turnaround

Shares are down about 14% year to date. While I think they offer substantial upside potential, I want to use a strategy that provides us with some downside protection while we wait for a turnaround. 

The strategy is known as a covered call. If you’re not familiar with how it works or need a refresher, watch this 90-second training video now.

With DISH trading at $62.39 at the time of this writing, we can buy 100 shares and simultaneously sell one DISH Jan 67.50 Call, which is trading around $1.75 ($175 per contract), for a net cost of $60.64 per share. This means the stock could fall almost 3% before we would experience a loss.

If DISH closes above the $67.50 strike price at expiration on Jan. 15, our shares will be sold for that price. In this case, we will make $5.11 in capital gains plus the $1.75 we received for selling the calls for a total return of $6.86 per share. This represents a profit of 11.3% over our cost basis of $60.64. Since we’d earn that in 66 days, it works out to an annualized gain of 63%.

If DISH does close below the $67.50 strike price, we keep the premium and the shares and can sell more calls while we wait for the company to benefit from its spectrum stockpile.

Note: To find out how you could pocket $795 in the next 48 hours using another covered call strategy, follow this link.

This article was originally published on ProfitableTrading.com: Don’t Underestimate The Potential Of This Company’s ‘Precious Commodity’