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Deutsche Telekom AG Message Board

  • Richard_L_Smith Richard_L_Smith Mar 30, 2010 7:53 PM Flag

    Way to play DT before ex-div?

    Had an idea and want to run it by the board.
    DT will go ex-div on or about 4/28, right?
    So it's almost a lock DT will go up between now and then, then sell off sharply right about ex-div. (anyway, that's my opinion.)
    My idea, instead of snagging some shares now at 13.30, buy a ton of MAY 12.5 CALLS on DT for about $1.00 and close out before ex-div. If DT goes up a buck in the next three weeks, I'll double my money.
    Say you have $10,000 to invest. You could buy about 750 share of DT with that money, or you can buy calls and control TEN THOUSAND shares between now and ex-div.
    Would appreciate any intelligent critique of my idea. Am I missing something here?

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    • Clearly your potential option strategy would not have worked...very interesting and odd action on this stock over the last month.

      I do not remember the math for how dividends affect option pricing, but it is very odd that the prices on $10 calls are essentially the same for May thru October. Would paying the dividend quarterly change this? I guess this could also be a function of lack of volume of options as well as the future de-listing...I just find it odd.

    • DT seems stagnant but it may be interesting if the stock falls to 13. Euro currency is so weak that it is a tough call option. Prefer the puts as this dog could not go up when the DAX was up by 1.5 percent.

    • Rest assured, someone always thought of your little ideas before you did, unless you are a genius, been there done that :-)

      Good luck

      and yes, don't put everything in options

    • I bet you would be nervous by now.

    • Option players understand dividend plays. You'd be getting in over your head.

    • Its not the worse idea, but short term options are all about timing. Look at last years chart, this company spiked down a couple of time in the last month on basically no news. I was playing the same idea and it never worked out exactly as I hoped but by having stock and being nimble I was able to make money...of course not as much as if I caught the options just right. With the stock you can always ride out the ups and downs. With options price decay makes this impossible.

      I am not saying don't use options but to bet the whole 10K is very risky...one poorly timed press release and you are out of everything. I would go 2/3 stock and 1/3 options with a 10K "bet." And I would not buy the options or stock all on the same day...roll into it.

      Good luck,

 
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