T/Rookie - The 5G rollout will be very destabilizing for Telcos so I wouldn't have high expectations but I do like T whenever they are around $30 as that's $220Bn and they pretty reliably make $20Bn so a nice, comfortable p/e. At $2.04, the dividend is 6% so you might want to own the stock. I'd sell the 2021 $30 puts for $4.25 and consider that free money (as I don't mind owning T at $30) and if you buy the stock and sell the $28 calls for $2.75 you net in for $23/26.50 (if assigned), called away at $28 with a $5 profit (21.7%) and a $4.08 dividend (17.7%) for 39.4% profit over two years so there's a great case for owning T with the short puts and calls. As an option alternative, you can:
- Sell 10 T 2021 $30 puts for $4.20 ($4,200)
- Buy 20 T 2021 $25 for $5.80 ($11,600)
- Sell 20 T 2021 $32 calls for $1.90 ($3,800)
Here we're netting in for $3,600 and the same $5,700 in margin in hopes of getting $14,000 back for a profit of $10,400 (288%) or, at $30, $10,000 for a $6,400 profit (177%) and the worst case here is owning 1,000 shares at net $31.80 (assuming the entire bull call spread is wiped out).
So 1,000 shares of T with the short puts and calls would cost you $23,000 + $5,700 in margin and pay back $29,080 for a $6,060 gain (26.3% on cash) or the bull call spread uses $3,600 cash, $5,700 in margin and makes $6,400 at $30 up to a potential $10,400 at $32. I'd rather have the option spread...
DAN/Dawg - Nice call. AXL looks very good as they are a totally boring company that makes $300M but you can buy them for $1.8Bn at $16.50 - very nice.
