Yield hunters are circling AT&T (NYSE:T) shares like ravenous wolves. And their attention is understandable. The telecom giant’s descent to a six-year low is boosting the dividend yield to a mouth-watering 6.4%. With support zones now being tested, AT&T stock seems ripe for a bullish trade.
Let’s start with the weekly chart to chronicle the last year’s decline. Since peaking at $43.89, AT&T has fallen 30% to levels last seen in 2012. Shareholders seeking a silver lining are pointing to the $31 zone which has proved a pivotal support zone for years now. Numerous rollovers were finally halted in this area, and it’s now being tested once more.
If bulls can once again prove their mettle, this could be the area where T stock’s slide is finally halted.
On the daily chart, the stock headed into last night’s release deeply oversold. That means a bounce is entirely logical. The true test will arrive when T runs into the declining 20-day and 50-day moving averages. If the price can clear them, then we’ll have a more substantial push to change the trend. Otherwise, this could turn into another in a long line of failed rallies.
Would-be buyers of AT&T stock hungry for the fat dividend could use options to sweeten the play. For example, why not sell puts as a way of getting paid to buy the stock at a discount?
Sell AT&T Stock Puts
Right now you can sell the Aug $31 puts for 55 cents. By doing so, you obligate yourself to buy shares at a cost basis of $30.45, or roughly a 3% discount to their current price of $31.38. But, you’ll only have to buy shares if the puts sit in-the-money at expiration. If T remains above $31, you will simply pocket the 55-cent profit.
And if the put ends up expiring worthless, you could continue to sell puts for September, October and so forth until assigned.
As of this writing, Tyler Craig held bullish options positions in T. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
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