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.
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