Sold AT&T (T) Naked Puts

I’ve been planning this trade all week, ever since I charted it on Monday on my first day of working at AT&T (NYSE: T). T behaved just as I said it would. It came down from $26.21 to $25.01 (I said $25.00 looked like support) and turned back up. I saw it when it was moving back up, while still below $25.10, but didn’t react quickly enough. Finally I entered a limit order to sell three naked puts at $1.00, below where it maxed out a little earlier in the day. The order didn’t hit and T just kept climbing slowly. After the reaction to the jobs numbers showed a bullish take, I decided to rethink my order.

While T was trading at $25.52 this afternoon, I reduced my limit order and it hit. I sold to open two October 25 T naked puts (TVE) at $0.79 each and received $146.50 after commissions. I didn’t like chasing the trade, but would have been more pissed at the situation if I didn’t get any skin in the game. I decided to lower my the quantity to two options just to make it a nice round half order. Just as I’ve done with other positions this week I’m leaving myself room to sell new puts and covered calls at the same time (basically a strangle while long the shares) if/when the puts are assigned.

Since I’ve been expecting a bigger pull back than we’ve seen I’ve kept my cash on the sideline too long. While $146.50 is nothing to write home about (well, I guess I am writing home about it here, but that’s not the point), it is still cash flow and gets me moving ahead again. If the markets do turn south again, I don’t have much at risk. If the markets stay sideways or continue in the rally, I’m setting myself up for 15-20 gains on an annualized basis. With this trade, my total premium intake for the week is $815.50. That’s more than I’ve done in a while and hope I’m not getting in at the peak or better yet that the slide lower is slow and I can roll positions easily. Either way, I’m not overextended and feel I’m back in the groove better with my new job and stock watching a little smarter.

Read more on AT&T at Wikinvest

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