As explained in my AT&T Stock article on Jan 31 2011, I did not hold my AT&T Stock puts until expiry. I bought to close my Feb $27 put strikes on Feb 11 for .09 cents. This represented a return of .63 cents which is better than the 75% I aim to reach on such trades. At .63 cents I earned 87.5% of the total AT&T Stock put trade for February.
Now a couple of weeks later and AT&T Stock is once again under pressure. As explained in my article Why T Stock, I look for stocks that are in trading ranges and then set up a strategy of put selling and if assigned shares, covered calls to be exercised out of those shares. It’s a simple strategy but I have found that by studying stocks such as AT&T stock, I can find those large cap dividend paying stocks that trade in ranges and benefit from them. Select this AT&T stock link to learn more about AT&T Inc for investors.
AT&T Stock – Feb 24 2011 Put Selling Again
The trading range strategy on AT&T Stock continues to pile up profits. The last 3 trading sessions of AT&T Stock has seen weakness return as sellers once again trade out of AT&T Stock. Today (Feb 24 2011) the stock fell to $27.61 before closing at $27.92. This wide range of action creates volatility which drives up options premiums. In a case such as the past 3 trading sessions, the volatility pushes up put premiums.
Over the past few sessions T stock has moved back towards my support level of $27.50 and is now touching the lower Bollinger Band. I could wait until tomorrow to sell AT&T Stock puts but with the move lower today put premiums moved up and I captured more than 1%. Often when a stock such as AT&T Stock is trading within a range and it hits the lower Bollinger Band, it will bounce back up which would reduce the put premiums being offered. It’s a trading choice whether to wait another day and see if the stock falls further which would push up the $27 strike put premiums, or sell puts today knowing that there is a chance the stock could turn back up reducing the put premiums available now.
Since my strategy for my entire portfolio is to earn 1% a month, this makes my decision to sell puts today on T Stock an easy one. The put premium available is better than 1%, so there is no need to wait another day. Again the importance of having a plan and sound strategy makes investing much easier and increases the chance of consistent profits.
Today I sold the AT&T Stock March $27 puts for .38 cents. This is a return of 1.4% (before commissions) on AT&T Stock. To date I have now earned 4.4% return on AT&T Stock in 3 months.
AT&T Stock Summary for Feb 24 2011
Each one of my AT&T Stock trades continues to show the importance of having a plan. With the confidence that AT&T Stock will stay within its trading range for the next month at least, I can continue to watch my profit grow through put selling without owning any T stock.
The plan for AT&T Stock will be the same as before. I will look to buy to close my put trade in T Stock should I earn 75% of the put premium sold and another opportunity arises. If no opportunity arises, then I will hold the sold puts on AT&T Stock until March option expiry.