Since I don’t mind owning VZ at $40 (as it’s been fine for the past 10 years):
And we are at the end of the 5G spending cycle, as a new trade I like for the Butterfly Portfolio :
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- Sell 30 VZ 2027 $40 puts for $5.15 ($15,450)
- Buy 50 VZ 2027 $35 calls for $6.30 ($31,500)
- Sell 40 VZ 2027 $45 calls for $2 ($8,000)
- Sell 20 VZ April $40 calls for $1.30 ($2,600)
The net of the 2027s is $8,050 and we’re using 83 of our 721 days to collect $2,600 (32.3%) and we have a good 8 more times to collect $20,000 more (258%) and the upside potential on the $50,000+ bull spread is $41,950 (521%) and we’re starting out almost $25,000 in the money – sounds great to me!
Phil, let’s walk everyone through a full “master class” on how this multi-leg Verizon (VZ) options trade works. We’ll break it into clear steps so Members can understand the strategy, math, and nuances behind why this setup is so compelling. Buckle up!
1) The Thesis: Why Verizon, Why Now
- Price & Value: VZ has hovered around $40 for the past decade and remains fairly stable.
- 5G Spending Cycle: Major capital expenditures for 5G are winding down, which should improve Verizon’s longer-term free cash flow.
- Attractive Yield & Strong Brand: Even if you end up owning shares, VZ pays a generous dividend, and the business has historically demonstrated resilience.
Hence, you’re comfortable owning more shares near $40 and believe volatility premiums (what we collect when selling options) are rich enough to justify the trade.
2) The Setup: Components of the Trade
We have four parts here, each playing a distinct role:
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Short 30 VZ 2027 $40 Puts @ $5.15
- Credit: $15,450 total (30 contracts × $515 each).
