Hola from very wet Houston.

Music selection: Mother Mother — Tracy Bonham

Raptors who played the home game version of my T strangle earned almost 24% annualized in option premiums while capturing some capital gains upside.  Today we are going back to the trough to snack on more delicious T.  The price has improved so we are changing strikes.

Action: For every 100 shares of AT&T you hold, write one put (T150702P00033500) and one call (T150702C00035500).

You should be able to get a net credit of 77 cents or better on the spread.  Your annualized return over 38 days should be around 10.7% on very safe and stable T.  If we keep shares, current yield is an additional 5.6%.  Hungry raptors should continue to roll this trade forward at each expiry until shares are called away.

Devour your prey raptors!

AT&T, Inc. (T) – roll strangle

Never miss another opportunity to devour prey!

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4 thoughts on “AT&T, Inc. (T) – roll strangle

  • May 26, 2015 at 3:57 pm
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    so what happens here if at expiry, the price is below the PUT´s strike, you will have to buy another 100 shares additionally to the ones you already own?

    Reply
    • May 26, 2015 at 4:02 pm
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      That is correct. The strategy with a strangle is to buy a half allocation to the underlying. You then play both ends against the middle by offering to share your shares at a premium while simultaneously making a low ball offer on the remainder of your allocation. You are guaranteed to be at a minimum half-right. Last month I was 100% right and kept my shares, escaped assignment, and kept all premiums.

      Reply
  • June 2, 2015 at 2:42 am
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    What do you mean by half allocation? If I have 2 hundred shares, how does this work , write 2 puts and sell 2 puts ?
    Dp you ever use margin secured puts ?

    Thanks

    Vish

    Reply
    • June 2, 2015 at 5:56 pm
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      Vish,

      If you are targeting holding 200 shares total, buy 100 and write a put for another 100. That way if you get assigned, you have a full allocation and not an over-allocation.
      I rarely use margin to secure my puts. I sometimes stretch a few hundred dollars above my available cash but that is it. When you can earn 12% or better annualized returns, it is unnecessary to lever up 5x.

      Reply

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