Sold AT&T (T) Puts

Today with the DOW down 293 to 11503 and T down to 28.22 I entered into the following transaction in a taxable account.

STO 2 T Jan 21 27.5 Puts @.9              +168.45

I like to enter my income investments on down days. Check. For the recent past AT&T has found solid support at the 27 levels. If put to me our cost basis will be ~26.76 after commissions. At that price our dividend yield on cost is 6.4%. In addition, AT&T will probably announce a dividend increase in December with an ex-dividend date before our puts expire. Therefore, I expect our yield on cost to increase.

If these puts expire worthless our return is 3.1% which is 18.54% annual. For those who figure return on margin (ROM) the return on the margin requirement of $1059.61 is 15.9% or 95.14% annual.

AT&T is a stock we are interested in holding long term. If put to us (and we don't decide to roll the position) we will look forward to collecting the dividends and writing calls to lower our amount invested and increase our yield on cost.