T and VZ Strangles

On July 29, I mentioned in another thread that I don’t normally do short term trades on options for individual stocks, because the premiums are generally too high compared to my favorite (SPY), but that I was interested in looking at some of the big telecoms (T and VZ) because they generally have stable stock prices and lower volatility (and cheaper options). I noted that both T and VZ experienced a price shock (7/17 and 7/18) that could cause more motion than normal.

Both of these stock gapped down sharply, then 2 days later gapped up leaving what may be an island reversal that could signal a distinct bottom and strong upcoming uptrend. On the other hand they could simply consolidate and resume the long term downtrend starting in 2021. I entered a strangle on both of these on 7/31. January 19 expirations. T Call 19, Put 10. VZ Call 44, Put 24.

In recent action, both of these have traded down to where they have filled the up gaps for the island reversal. If they continue to trade below the islands, then the island reversal is definitely negated (if it isn’t already) and we could be looking to find a new low. Either way, I have given myself more time than usual with a January expiration.

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