What The Heck Is Wrong With Cellphone Stocks?

Yo Pit Crazies,

 

There was a time when telephone companies were thought of as utility companies.  When AT&T (Ticker: T) first split up, all the “Baby Bells,” as the new regional companies were called, traded in single digit volatilities in the 1980’s.

 

I met the guy (Roger) who was trading all those options on the P-Coast floor back then. He told me once that he was long one million gamma or something crazy like that! It seemed an unreal number to me. The time decay was so bad, he thought he would go broke!

 

Well he didn’t.

 

The baby bells started merging, and inventing this new cell phone technology stuff.  

 

Roger ended up buying a small island off the coast of Australia.  True story.

 

Let’s look at the story now.

 

AT&T Corp (Ticker: T) and Verizon Inc (Ticker: VZ) are the two largest telecommunications companies left.

 

T has to have the worst high-level management of any company in the USA. Even with the explosive growth of phones over the last 10 years, T’s stock is down in the mid-20’s! Let’s ignore T.

 

VZ is the better managed of the two companies, but that is not stopping shareholders from dumping shares … in size, I might add. 

 

Note how Vol Man is surging VZ’s big candles lower over the last week or so. What’s causing VZ to dump? It could be any number of things … Spectrum issues, competition from Alphabet (Ticker: GOOGL), Charlie Ergen (Dish Network co-founder and chair), or Elon Musk. Whatever it is, it caused a major dump:

 

 

VZ three-month chart with one-day candles

 

I don’t see how Apple Inc (Ticker: AAPL) is down $1, and the big cell companies are down almost 10% on just the supply chain. While the stocks look cheap, I think the relative option vol is cheaper.

 

I don’t know what is going on, but that chart does not look like a 17% volatility stock with 32% realized vol and a 9% move in a week. I remember Roger (the Baby Bells trader) saying, “they didn’t move for a while … but then they did.”

 

VZ November 12th 52/49-strike strangles don’t look very expensive to me. I bought some Wednesday. 

 

Capitol Gains w/ Frank Gregory
Option Pit DC and Wall Street insider Frank Gregory and I run a portfolio approach to trading options with stocks that have good long-term prospects based on Frank’s K Street knowledge and my options expertise.

The live Power Moves Portfolio trade log is here.

 

      • Invesco Solar ETF (Ticker: TAN) is up $11 in six days, and I have shot to collect on my TAN Oct15 90-strike calls if the alts keep jumping.

 

Pro Trading Room:
The Pro Room is Option Pit’s live access to Mark and myself during trading hours. Our Pro students post trade ideas with Mark and me during the entire trading session. 

 

The Pro Room was taking some index put fly profits, and there were lots of long commodity plays, too.

 

Thanks for posting @Richard D that was a good one

      • Cat  9:56 AM  BTO $FCEL Oct22 7.5-strike calls

Trading Legion:
The Trading Legion is an intermediate-level education and a long strangle trading vehicle. The goal is to teach students the best times to buy options.

 

      • I did add a Barrick Gold (Ticker: GOLD) diagonal call spread today, as the taper looks less likely.

 

Volatility Edge & Volatility Trading Club:

Volatility Edge is run by Mark and uses the proprietary Option Pit VIX Light indicator to guide volatility trading. The Vol Trade Club is run by me (AG), and employs a long strangle strategy that seeks to use VIX future decay to pay for upside VIX, VXX and UVXY options.

The Option Pit VIX Light Is Yellow. The VIX of the VIX, VVIX, is still above 100, but the VIX curve is dropping back into contango (futures trading progressively higher than spot) and we should continue to see the teens for VIX this week.

 

Remember, a lot of vol strategies I use are market neutral. That means whether SPX or VIX go up or down, the positions still make money. This is a technique you can learn in the Volatility Trading Club and Volatility Edge!

 

To Your Trading Success,

 

AG

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