The recent (Jan 6 2011) put selling investment in AT&T Stock worked out as planned and the sold puts at the $28 strike expired. In the last trading session (Jan 28 2011) AT&T stock (T stock) has a nice sell off. While selling in AT&T Stock has slowed today, T stock is bouncing just below my support point of $27.50.
I have taken advantage of the move lower in AT&T Stock and sold the Feb $27.00 puts for .72 cents. This is a return of 2.6%.
The plan here will not be to hold them until they expire but to close the sold puts early if the profit is decent. I prefer to earn at least 75% of the option premium I have sold. In this instance I sold the AT&T Stock (T Stock) Feb $27 put for .72. That means I would want to earn at least .54 cents of the .72 cents sold, which is 75% of the put premium I sold.
However before closing any AT&T Stock puts, I would want to find another trade to move my capital into, otherwise I will hold these puts to expiry. Select this AT&T stock link to learn more about AT&T Inc for investors.
AT&T Stock (T Stock) Chart For Jan 31 2011
Below is the T Stock chart for Jan 31 2011. The previous trading sessions of selling in AT&T Stock is obvious on the chart and the heavy selling of Jan 28 is definitely noticeable. Why many investors might wonder why I would sell the $27.00 strike and not consider a lower strike, the answer can be found in my article Why T Stock. AT&T stock is stuck in a range. Selling such as T Stock has seen over the past two days continues to keep AT&T Stock in that range but presents terrific opportunities for put selling.
AT&T Stock for Jan 31 2011 shows the drop in the stock's value which brought in large premiums for put selling.
AT&T Stock – Understanding The Trading Range
As explained in my article Why T Stock I sell puts on stocks that I have confidence in and which meet my criteria. AT&T Stock more than meets my criteria and the trading range I have for T Stock is between $25.00 to $28.00. Therefore selling at the $27.00 strike makes a lot of sense. I believe based on my chart, that AT&T Stock will stay within this trading range for some time yet. Therefore if I am assigned shares in T stock at $27.00 I am confident I can sell covered calls until I am exercised out of AT&T Stock. At that point I will repeat the entire put selling process on AT&T Stock.
Without having a plan an investor, whether selling options on stocks like AT&T stock or trading stocks, will inevitably run into trouble. The importance of having a plan is paramount to successful investing and my plan on AT&T Stock provides me with the confidence to leave emotion aside and sell puts at the $27.00 strike.