Put Selling T Stock (AT&T) May Be More Profitable On Rumors

AT&T Stock is up 12% since bottoming January 18 2013 at $32.76. While certainly not unusual for T Stock to have these kinds of moves, I didn’t believe earnings were strong enough to warrant a 12% move higher in such a short period. The previous quarter T Stock earnings missed estimates by 2 cents a share. On April 23 AT&T Stock will release the next quarterly earnings and analysts are looking for .64 cents versus .60 cents last year for the same quarter.

The 6 month daily chart below points out some interesting signals which I have been watching in T Stock.

AT&T Stock 6 month Chart

The 52 week AT&T Stock high was $38.58 on September 21 2013. Following that high T Stock pulled back falling all the way to $32.70 by November. This seems to have put in a bottom for T Stock. The $34 put strike is interesting as it is evident from the chart below that if assigned at $34 there is a very good chance I could be exercised back out at the same strike, since $34 has been revisited numerous times since T Stock fell in November.

Meanwhile I am holding the March 16 options expiry $35 puts strike and the April 20 options expiry $33 and $35 strikes naked puts as well.  I feel pretty comfortable at those strikes after reviewing this 6 month chart. Should T Stock tumble back I see no reason to be concerned as I should be able to easily roll down the $35 naked puts to $34 and wait for T Stock to eventually revisit the $34 level.

T Stock - 6 month chart

T Stock daily 6 month chart

Meanwhile the rumor that AT&T is considering buying a 25% stake in India’s Reliance Jio Infocomm Ltd may be a catalyst that will see more volatility in the stock. Reliance Jio Infocomm is controlled by Indian billionaire Mukesh Ambani.

The rumored amount is 3.5 Billion dollars as reported by the Times of India newspaper. While AT&T declined to comment, it has been known for a long time that the company wants to expand in a big way outside of the United States. This could be a good move for the company to get into India which has a growing telecommunications industry. It could also be a good for my Put Selling against T Stock.

T Stock Volatility

It is volatility that drives up option prices. Investors hate uncertainty and the spending of 3.5 billion dollars is not a small amount. This news, whether true or not may be all that I need to get T Stock volatility rising and put options premiums up.

As long as T Stock stays clinging the Upper Bollinger Band the trend in the stock is higher. When T Stock moves away from the Upper Bollinger Band and turns sideways I will be looking for the stock to pull back and that will be my clue to enter a few more Put Selling trades on T Stock.

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