As regular readers know I love Put Selling T Stock. Due to all the Put Selling I have a lot of T Stock naked puts. I am holding lots of T Stock puts from Put Selling throughout the past few months and just the past few days and then two days ago I bought T Stock shares as per my Bollinger Bands Strategy Trade which at the time seemed like a great idea until the news came out yesterday of the huge hit to AT&T of $10 billion due to pension obligations and unspecified losses on Hurricane Sandy and smartphone sales.
T Stock Pension Obligations
AT&T after the markets closed announced the $10 billion pension obligation charge and then went on to say that the actuarial loss was really $12 billion, which was partly offset by an asset gain of about $1.9 billion. Then it hit investors again by saying it had lowered its expected long-term rate of return due to uncertainty in the securities markets and the US economy for 2013.
T Stock Pain
Piling on the bad news, T Stock went on to say that earnings will be hurt by higher than expected damage costs from Hurricane Sandy and that smartphone costs were higher than anticipated. It expects to report a $175 million reduction in its operating income.
Verizon Stock Set The Stage
Verizon had previously warned that it was going to take a 7 billion dollar hit for pension obligations which sent its stock tumbling for about a day and then it recovered immediately. It was due to this that I felt Put Selling T Stock this morning would make an excellent trade as I expected the stock to fall to at least $32.25 making the Feb $32 a great Put Selling return and I was aiming for the March $31 as well.
Put Selling The T Stock Tumble
So this morning I was all set for the stock to tumble and as I have 10 naked puts at the January $32.oo put strike that will expire today I was hoping for a big dip as overnight the stock fell 1.3 percent to $32.76 (after hours trading). Last night on my forum I mentioned that it should be an interesting open on AT&T today. I was all set to start Put Selling when the stock opened at $32.76 and immediately jumped! I put in an order to Sell To Open (STO) the Feb $32 for .40 cents and naturally was not filled. I changed my Put Selling on the Feb $32 to .34 cents and got a fill at around 9:41.
Put Selling Feb $32 puts was not easy this morning
Put Selling March $31 Put Strike
I also have Sell To Open (STO) orders to do Put Selling on the March $31 but I am sitting at .50 cents so I doubt that’s going to be filled any time soon. Obviously investors think the bad news is out and finished.
T Stock Bounce – Stranger Than Fiction?
I have said for a while now that I thought T Stock was fairly valued around $32.00 and above $34 it is very overvalued. However with the news about the smartphones costs and the pension obligation which is no small amount, despite it not showing up in earnings, I would have thought the stock would have collapsed at least to $31.00. This is not great news for T Stock which continues to trade at 43.1 times price to earnings and has a profit margin of just 3.68%.
Meanwhile Verizon stock has a PE of 39.3 X and a profit margin of 10.74% and a dividend of 4.89% which is just a bit lower than T Stock’s dividend of 5.42%.
Technical Bounce off Lower Bollinger Band of T Stock
So perhaps the bounce this morning was a technical one, off the Lower Bollinger Band but I doubt it was all just technical. Buyers stepped up to the plate and picked up shares and obviously buyers feel that the dividend is worthy of consideration as well. Perhaps a lot of investors felt that this was all the bad news for the year from T Stock.
Put Selling and Momentum in T Stock – FullyInformed Members Strategy Article
FullyInformed Members can log into the rest of this article here as I look at how to use Momentum to know when to stay away from a stock and when to get busy Put Selling or trading the stock. Non-members can join here.
T Stock Internal Links
Review T Stock Trades for 2012
Review T Stock Trades for 2011
More Articles Dealing With T Stock
Members Only Strategy Articles Dealing With T Stock
T Stock External Links
Stock Holder Services For T Stock
Bollinger Band Strategy Trade Links
Understand The Bollinger Bands Strategy Trade – Strategy Paper details out the strategy