T Analysis

AT&T Inc. (T)

Update April 26, 2017: T rose after earnings were published and remained within the zone of maximum profit. That positioning within the structure of the trade, combined with a sharp declined in implied volatility, brought me close enough to my goal to exit.

Shares rose by 0.7% over one day, or a 247% annual rate. The options position produced a 32.7% yield on debit for a +11,918% annual rate.


 

T publishes earnings on Tuesday after the closing bell.

I shall use the series of weekly options that trade for the last time 10 days hence, on May 5.

Implied volatility stands at 46%, which is 1.6 times the VIX, a measure of the volatility of the S&P 500 index.

T’s IV stands in the 43rd percentile of its annual range and the 96th percentile of its most recent broad movement.

The price used for analysis was $39.80.

Premium: $0.67 Expire OTM  
T iron condor Strike Odds Delta
Calls
Long 41.50 91.1% 10
Break-even 40.67
Short 40.00 57.1% 44
Puts
Short 39.50 41.0% 58
Break-even 38.67
Long 38.00 87.6% 12

The premium is 43% of the width of the position’s wings.

The risk/reward ratio is 1.3:1.

Decision for My Account

I have entered a position on T as decribed above. The stock at the time of entry was priced at $39.83.

By Tim Bovee, Portland, Oregon, April 25, 2017

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