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Tuesday, February 27, 2024

Top Trades for Thu, 23 Jul 2020 10:19 – T

Top Trades for Thu, 23 Jul 2020 10:19 – T

Good morning and wheeeeeeeee!  

What a way to start the day.

So of course we're going to bounce at 26,800 as it's a nice, fat, pivot-point (see yesterday's webinar) and was clearly support yesterday so we calculate the bounce as 40-points (weak) back to 26,840 and 80-points (strong) back to 26,880 but if 26,840 breaks, why risk the gains?  Honestly should have taken the money and ran at 26,800 as it was certain to bounce and then just pick it up on the break below the line – you don't need to ride out bounces on futures – there's no friction cost to the trade!

Big Chart – NYSE is the key to everything at our 12,540 line (now 12,586).

T/Batman – Good call.  If not for Warner hurting them, this would have been gangbusters.  

AT&T said adjusted earnings for the three months ending in June was pegged at 83 cents per share, down 6.75% from the same period last year and 4 cents ahead of the Street consensus forecast. Group revenues, AT&T said, fell 8.9% from last year to $41.billion, just shy of analysts' estimates of $41.1 billion.

AT&T said it had around 36.3 million customers logged for its newly-launched HBO Max service (including legacy HBO subscribers) after adding around 3 million over the second quarter. That figure, however, is down from 34.6 million at the end of last year. Postpaid mobile phone subscribers, however, fell by 151,000 against market forecasts of additions totaling around 7,000. 

“Our solid execution and focus in a challenging environment delivered significant progress in the quarter, most notably the successful launch of HBO Max, resilient free cash flow and a strengthened balance sheet,” said new CEO John Stankey. “Our resilient cash from operations continues to support investments in growth areas, dividend payments and debt retirement."

"We are aggressively working opportunities to sharpen our focus, transform our operations and continue investing in growth areas, with the customer at the center of everything we do,” he added. 

AT&T shares were marked 0.8% lower in early trading immediately following the earnings release to change hands at $29.92 each, a move that would still leave the stock with a year-to-date decline of around 22%.

Revenues from WarnerMedia, its entertainment division, fell 22.7% to $6.8 billion as the coronavirus pandemic delayed film production and closed movie theaters at home and around the world. WarnerMedia earnings fell 13.3% to $2.08 billion.

Finally a Top Trade Alert!  T pays a $2.08 dividend at 0.52/quarter so it's great to own the stock but it also means we can just be aggressive in establishing a position since we'd be happy to own it, right?

  • Sell 10 T 2022 $28 puts for $3.75 ($3,750) 
  • Buy 30 T 2022 $25 calls for $5.60 ($16,800)
  • Sell 30 T 2022 $30 calls for $2.80 ($8,400) 
  • Sell 5 T Sept $30 calls for $1 ($500) 

That's net $4,150 on the $15,000 spread so we've got $10,850 (261%) of upside potential if T can simply hold $30 for 18 months and, if it can't, we're selling $500 in the first 57 out of 547 days of this trade so we have a chance to collect another $5,000 to further soften the blow of owning 1,000 shares of T at net $32.15 (assuming the trade is completely wiped out and you are assigned at $28).    

If all goes well, you can make over $2,000/yr selling short calls, which is as much as the dividend would be if you owned the stock.