$T

The trade (filled today, Oct 9):

• Buy 100 shares of AT&T (T) at $22.07
• Sell to open the Jan 15, 2027 $20 call
• Net debit: $19.40/share ($1,940)

The math:

• Called away at $20: $0.60/share = 3.1% in 98 days → 11.5% annualized
• Plus the January quarterly dividend ($0.2775/share) = 1.4%
• Total: $0.8775/share = 4.5% in 98 days → 16.8% annualized
• Breakeven: $19.40

Why this trade, why now:

This is opportunistic, and we’ve seen this movie before. Shortly after SpaceX went public in June, the same satellite-to-cell fears sent T into a tailspin to a 52-week low of $19.89 in early July - then it bounced as investors decided the threat was exaggerated. Today’s selloff is the sequel: SpaceX’s ~$8B purchase of Grain Management’s 800 MHz spectrum, which Musk called “the last critical piece of the spectrum puzzle,” triggered T’s worst single day in over 24 years.

So the stock already fell 10%, and the deep in-the-money $20 call stacks roughly another 10% of downside protection on top - from yesterday’s close near $24.60, this position doesn’t lose a dollar until T falls 21% to $19.40. Note the symmetry: that breakeven sits just below the $19.89 July low, so the trade profits even if T retests the exact bottom of the last SpaceX scare and holds. Citi’s Michael Rollins made the same call this morning, telling clients to buy the dip - he doesn’t expect SpaceX to materially impact the big-3 carriers’ results until at least 2029.

The $0.2775 January dividend (ex-div expected ~Jan 8, before the Jan 15 expiry) is in the numbers. With ~$0.50+ of time value still in the call versus a $0.2775 dividend, early assignment ahead of the ex-div isn’t rational - we should collect it.

The risks, plainly:

• Upside is capped at $20. If T snaps back to $24, we keep our $0.60 and watch the rest go by.
• Below $19.40, losses accrue like owning the stock - just from a $2.67 lower starting point.
• If this time really is different and satellite-to-cell eats the carriers faster than anyone expects, the 21% cushion is all we’ve got.