Strategies for Investors Considering Telephone & Data Systems Inc.
Investors attracted to Telephone & Data Systems Inc (Symbol: TDS) shares, currently priced at $37.60 each, may find value in exploring alternative strategies. One compelling option is selling puts, particularly the January 2026 put at the $30 strike. This contract currently has a bid of $3.10. By collecting this premium, investors could realize a 10.3% return based on the $30 commitment, translating to a 14.4% annualized rate of return.
It’s crucial to understand that selling a put does not provide the same upside potential as owning shares. The put seller only acquires shares if the contract is exercised, which occurs when the contract’s $30 strike price becomes more beneficial than the current market price. Unless Telephone & Data Systems sees a 20.1% decline in share value, making the contract likely to be exercised, the seller’s profit lies solely in the premium collected, yielding that 14.4% annualized rate of return.
Interestingly, this annualized rate of 14.4% exceeds the company’s dividend yield of 0.4% by 14%, based on the current market price. Should an investor decide to buy the stock to capture the dividend, they would face a larger risk; the stock price would need to drop 20.11% to reach the $30 strike price.
Dividends are historically volatile and depend on each company’s profitability. For Telephone & Data Systems, reviewing its dividend history can provide insights into the likelihood of continued dividend payments and the reasonableness of the current 0.4% yield expectation.
Additionally, the chart below illustrates the trailing twelve-month trading history for Telephone & Data Systems, indicating where the $30 strike price resides relative to past performance:
This chart, combined with the company’s historical volatility, helps assess whether selling the January 2026 put at the $30 strike for a 14.4% annualized return aligns well with the risks involved. The trailing twelve-month volatility for Telephone & Data Systems, calculated using the last 250 trading days and the current price of $37.60, stands at 53%.
During Tuesday’s mid-afternoon trading, put volume among S&P 500 components reached 775,332 contracts, matching call volume for a put:call ratio of 0.73. This figure suggests heightened interest in puts compared to the long-term median ratio of 0.65, indicating more put buyers than typically expected in today’s options trading activity.
Top YieldBoost Puts of the S&P 500 »
See also:
- FAT Stock Predictions
- CRL Shares Outstanding History
- REZ YTD Return
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
