How to manage a Long Term position – starring AT&T

One of the positions in my Long-Term account is $T. The thesis here is that this is a leader in the mobile space and should continue to see growth as more cell phone users move into smartphones and 3G/4G tablets.

What I would like to cover in this post is how selling Calls against a position can earn income and improve the overall net return – even when the underlying positions is flat from your entry (mine was in May 2012) or has a minor gain.

Here is the breakdown:

- Long the stock on May 9 2012 with an entry of $33

- I have sold Calls against this long position, or built a Collar, several times since long stock entry:

Option Trade Credit/Debit
StO June 36 Call (& expires) 0.23
StO Aug 36 Call for .22 0.22
BtC Aug 36 Call at .47 on 7/26 (-.25) -0.47
StO Aug 38 Call at .82 on 8/3 (& expires) 0.82
StO Oct 38 Call for .31 on 10/5 0.31
BtO Oct 37 Put for .18 on 10/8 (now a Collar) -0.18
StC Oct 37 Put at 1.56 on 10/16 1.56
2.49

Currently price is at $33.73 so I have a small gain on the long stock position (not including dividends). But when you include the $2.49 in gains from the Option trades against the long stock, that is a nice bit of income.

So in summary, if you have long-term account positions don’t just let them sit there – put them to work.