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.

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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
Calls
Long	44.00	88.1%	15
Break-even	42.60
Short	41.00	49.7%	54
Puts
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