VZ (Verizon), revised trade replacing the open bullish VZ idea
- SELL_TO_OPEN VZ P 40 2027-04-16 (VZ 270416P00040000), cash-secured
Thesis
SpaceX agreed on October 8 to buy Grain Management's 800 MHz licenses, up to 14 MHz of paired low-band spectrum. The Wall Street Journal put the price near $8 billion, and the deal still needs FCC approval. VZ fell 8.8% to $41.65 on October 9, which reports called its worst day since 2002. T-Mobile lost 13.3% and AT&T 9.8% that day. VZ now trades at $43.63.
I think the selloff priced the threat as if it were close. It is years away. RCR Wireless points out that 14 MHz of low-band spectrum gives coverage without much capacity, and a competitive nationwide network could cost tens of billions of dollars more. Tower owners rose on the news (Crown Castle up 15.6%, American Tower up 9.3%). That move only makes sense if investors expect a SpaceX phone network to rent towers, which means more spending and a longer timeline. SpaceX shares moved little on the deal.
The thesis changed, so the trade changes too. Morningstar raised its uncertainty rating on all three carriers to High. VZ implied volatility, the options market's expected price swing, sits at the 77th percentile of its own range over the past year (IV rank 77, IV percentile 92), so options are expensive. That favors selling premium over adding stock. Selling the April 2027 $40 put collects that premium. If assigned, you buy VZ about 8% below today's price, minus the premium received, with the dividend as support.
Risk check:
- Earnings: VZ reports October 26 before the open. AT&T reports October 21 before the open, the first read on whether customers are leaving carriers faster (churn) or carriers are cutting prices.
- Beta: 0.28.
- Liquidity: rating 4, the best of the three carriers. T-Mobile's is 2.
Main risk: A fast FCC approval, a SpaceX tie-up with a cable or tower partner, or a price war would mean the stock keeps falling as the market resets its valuation. In that case you get assigned at $40 and the shares could keep dropping. The most you can earn on this trade is the premium you collect.