AT&T Inc. (T) Stock Is Dialed In — As You Should Be

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I’m making a call on AT&T Inc. (NYSE:T) and it’s purely technical — get long now! But for investors that want to get really dialed in, a married put position is the way to go for T stock bulls. Let me explain.

T stock is going higher. Our call or basis has its roots the aftermath of AT&T’s well-received earnings report. Shares ramped higher by about 7.5% following the company’s 5 cent profit beat and results made more promising with expanding margins, improved postpaid churn rates and wireless net adds of 2.8 million.

Having said that, given an intensely competitive business, a pending merger with Time Warner Inc (NYSE:TWX) still looming, as well as typically less productive seasonality for market bulls, I don’t mind keeping my call purely technical and completely tethered to that line in the sand.

T Stock Weekly Chart


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Source: Charts by TradingView

After breaking out of a substantial corrective base of around three years in duration back in early 2016, T stock rallied strongly for about five months.

The bad news for buy-and-hold shareholders, gains of around 22% were short-lived and essentially vanished in all of three months’ time. At least they’ve got that income stream in excess of 5% to sit back and enjoy, right?

Unequivocally, one significant outcome within the hard-hitting price retreat was the decline was met with support from buyers at the 62% retracement level, as well as the area from which T stock had previously broken out from.

The better news for investors today is further confirmation of technical support was provided a couple weeks back. The aforementioned bullish earnings reaction manifested itself into a double bottom pattern.

Now and with shares having constructively pulled back the last couple weeks, positioning for upside and an emerging bullish trend looks all the more attractive.

T Stock Married Put Strategy

Given our view T stock has put in a bottom, readying to turn higher, but also always respectful of risk in the event things don’t go as planned, a married put position on shares of AT&T looks like a good starter position.

Reviewing T’s options and shares at $38.35, one such combination is buying the Oct $36 put for 45 cents and long T stock for a spread price of $38.80.

What’s this combination offer T stock investors? On the upside if shares rally and begin to make new highs this bull owns AT&T shares just other shareholders. As well, there’s also quarterly dividend income of 48 cents to look forward to capturing.

Profits for this married put position compared to a simple long stock position will always trail, but by no more than 1.15% due to the insurance provided by the protective put. But iff things go as planned and T stock rallies from here, the investor could also consider offsetting the cost of the $36 put with the sale of an at- or out-of-the-money call.

Bottom-line though, if things don’t go as planned and given the important technical-based bottom-line discussed above, this strategy makes a good deal of sense; rather than relying too heavily on the market to bail shareholders out of a bad position which could prove a good deal worse.

Investment accounts under Christopher Tyler’s management currently do not own any of the securities mentioned in this article.  The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2017/08/att-inc-t-stock-is-dialed-in-as-you-should-be/.

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