T-Mobile (TMUS) fell hard, dropping to its lowest level in almost 3 years, down 12% on the day. The slide came after SpaceX (SPCX) agreed to buy a nationwide 800 megahertz spectrum portfolio. The deal gives SpaceX government-issued licenses with the exclusive right to send wireless data over specific low-band radio frequencies across set geographic areas.
The news lifted cell tower stocks and hit the big carriers. Verizon (VZ) and AT&T (T) fell alongside T-Mobile (TMUS). Selling sped up during the day: morning drops of 6-7% grew to 9-12%, with TMUS off 12%.
Musk moving into telecom
Elon Musk is one of the biggest disruptors in recent memory, now adding telecommunications to the list. He appears to be entering the business fairly easily because the infrastructure is already built from his other work. This sets up a long debate over the best phone carrier and best internet service, with Musk in the middle of it. About $39 billion in market cap came out of the three carrier stocks in one day. The old warning about Amazon applies here: if Musk gets into your business, you are in trouble.
Why T-Mobile was already weak
TMUS has been a falling knife for the last year and a half. After hitting all-time highs, it is down 45% from levels a year and a half ago. The drop traces to stalling revenue growth, slowing subscriber adds, rate plan friction that pushed churn higher, and rising non-traditional competition. T-Mobile's valuation usually runs higher than its competitors, so a pullback is not surprising. The open question is how many subscribers Starlink could pull from the big three carriers already in the market.
Example trade 1: bearish put calendar
A 148 put calendar on TMUS: buy the October 23rd put, sell the October 16th put, same 148 strike, one week wide. October 23rd weekly options expire in 14 days; October 16th monthly options expire in 7 days. It first traded near 73 cents and was around $1.15 later, a gain of almost 50% as the stock moved toward the 148 strike. The downside move is about $6.
The debit paid is the risk: 73 cents means $73 at risk, more if entered near a dollar. The goal is for the stock to land at or near 148, a couple dollars below the current price. The profitable range runs roughly 141-142 on the downside and about 155 on the upside. There is assignment risk over the next 7 days. The bad outcomes: the stock reverses higher, or it dumps below 141-140, where profit falls off. Pick the strike that fits where you think the stock goes.
Example trade 2: cash-secured put
TMUS pays a 3.1% dividend yield, not guaranteed. Instead of a covered call, a cash-secured put carries the same risk profile and lets you buy shares at a lower price if the stock keeps falling. Using October 23rd weekly options, which expire in 14 days, also skips earnings on the 28th and that event risk.
Sell the October 23rd weekly 150 cash-secured put for about a 240 credit; it was trading over $4 (420) later. This is a neutral-to-bullish play. The credit is the profit potential: a 240 credit earns $240, a $4 credit earns $400. Risk runs all the way to zero. Below the 150 strike you may be assigned and buy the shares. The 240 credit lowers the break-even to 147.60, so you buy at a discount, with over $14,700 at risk. If the stock stays above 150, you keep the credit. If assigned, owning the shares is capital-intensive but starts paying the 3.1% dividend. The expected move out to October 23rd is $9, which can guide strike selection. This is a way to become a buyer of T-Mobile below the market.
