This position uses the Covered Calls Advisor's Dividend Capture Strategy (see here). T-Mobile has an upcoming quarterly ex-dividend of $.88 per share that goes ex-dividend on May 30th, 2025 which is one week prior to the June 6th, 2025 options expiration date. This is equivalent to an absolute annual dividend yield of 1.5% (at the current $240.65 stock price). This dividend increases the potential annualized return-on-investment results (compared with a similar position without a dividend capture potential) and the dividend is included in the detailed potential return-on-investment calculations shown below. Either an early assignment on the last business day prior to the ex-dividend date or on the June 6th, 2025 options expiration date would be a desirable result given the annualized return-on-investment potential upon assignment for either outcome. As preferred, there is no intervening T-Mobile quarterly earnings report prior to their June 6th options expiration date.
T-Mobile is now one of the three telecom triopoly companies (along with Verizon and AT&T). Together they hold about 97% of U.S. market share with T-Mobile at 131 million subscribers and a 32% share as of Q1 2025. Verizon has 36% share and AT&T has 29% share. It now seems most likely that 2025 will be a relatively stagnant retail sales environment in the U.S. overall, but consumers are likely to be unwilling to eliminate their cell phone subscriptions in a meaningful way.
As detailed below, two potential return-on-investment results are:
- +1.0% absolute return (equivalent to +39.3% annualized return-on-investment for the next 9 days) if the stock is assigned early (the last business day prior to the May 30th ex-dividend date); OR
- +1.4% absolute return (equivalent to +30.8% annualized return over the next 16 days) if the stock is assigned on the June 6th, 2025 options expiration date.
The simultaneous buy/write transaction was:
5/21/2025 Bought 100 T-Mobile shares @ $240.65.
5/21/2025 Sold 1 T-Mobile 6/6/2025 $232.50 Call option @ $10.39 per share.
Note: the Implied Volatility of this Call option was 25.3 when this position was established.
5/30/2025 Upcoming quarterly ex-dividend of $.88 per share.
Two possible overall performance results (including commissions) for this T-Mobile Covered Call position are as follows:
Covered Call Cost Basis: $23,026.67
= ($240.65 - $10.39) * 100 shares + $.67 commission
Net Profit Components:
(a) Option Income: +$1,038.33
= ($10.39 * 100 shares) - $.67 commission
(b) Dividend Income (If TMUS option exercised early on May 29th, the last business day prior to the May 30th, 2025 ex-div date): +$0.00; or
(b) Dividend Income (If stock is assigned on the June 6th, 2025 options expiration -- so the dividend is captured): +$88.00
= ($.88 dividend per share x 100 shares)
+($232.50 strike price - $240.65 stock purchase price) * 100 shares; or
(c) Capital Appreciation (If shares assigned at $232.50 strike price at options expiration): -$815.00
+($232.50 - $240.65) * 100 shares
Either outcome provides a satisfactory return-on-investment result for this T-Mobile US Inc. Covered Call investment. These returns will be achieved as long as the stock is above the $232.50 strike price at assignment. However, if the stock declines below the strike price, a breakeven price of $229.38 = ($240.65 stock price - $10.39 Call option price - $.88 dividend) provides 4.7% downside protection below today's stock purchase price.
