Bullish trade on AT&T

Since December 2012 AT&T (T) has managed to grow revenue from $127B to almost $147B at the end of 2015, which is an increase of 15.7%. This puts AT&T in a very small and elite club of Fortune 15 companies that are able to grow at such a steady rate, even if some of that has been through acquisitions. As an added bonus, the company pays a rock-solid and sacred 5% dividend based on it's current share price of $39.56. Shares of AT&T have been on a tear recently, out-running the S&P as investors have fled to safer alternatives from rising interest rates and the rocky start for equities in 2015. Shares traded from $30-34 for much of the past year until January when they took off to the upside.

We see this trend continuing and are placing a cheap trade to profit on this move if it continues higher. We are buying the June T $40 Calls for $0.60 cents, and selling 2x the June $36 Puts for $0.25 cents. This trade will cost us $0.10 cents, and give us long exposure to AT&T.

If AT&T moves lower, we will lose money on the Calls, and the Puts will increase in value against us. We also may be forced to buy the stock if it goes below $35.75 prior to June expiration, which we wouldn't mind owning considering the dividend and long-term prospects for the company. Telecom isn't a sexy industry, however this company is a leader in the sector, and has an admirable track record of growing revenue and paying a dividend.