T Analysis

AT&T Inc (T)

Update Feb. 13, 2017; As T neared its target price, I exited for a profit. My goal was 25% of maximum potential profit; an order entry error on my part got me out at a slightly different price, 22.5% of maximum, potentially costing me 4 cents per share in profit, or $4 per contract. A careless error, but a small cost for the lesson learned.

T zig-zagged after earnings were published, rising then falling then beginning to rise again when it interrupted the trend by gapping downward today, allowing for the exit.

Shares declined by 1.4% over 19 days, or a -27% annual rate. The options position produced a 29.0% yield on debit for a +558% annual rate.

T publishes earnings on Wednesday after the closing bell.

I shall use the MAR series of options, which trades for the last time 51 days hence, on March 17.

Implied volatility stands at 17%, which is 1.6 times the VIX, a measure of the volatility of the S&P 500 index.

T’s IV stands in the 39th percentile of its annual range and the 68th percentile of its most recent broad movement.

The price used for analysis was $41.36.

Premium: $1.60 MAR iron fly
T Odds Delta
Long 44.00 88.1% 15
Break-even 42.60
Short 41.00 49.7% 54
Short 41.00 51.3% 46
Break-even 39.40
Long 38.00 86.9% 12

The premium is 53% of the width of the position’s wings.

The risk/reward ratio is 0.9:1.

Decision for My Account

I have opened a position on T as described above. The stock at the time of entry was priced at $41.37.

By Tim Bovee, Portland, Oregon, Jan. 25, 2017

4 thoughts on “T Analysis

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s