Collecting AbbVie Premium - That Didn't Take Long
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That certainly didn’t take long. Fidelity alert worked like a charm. I was sleeping in and woke up to a text that AbbVie (ABBV) crossed above the $107 alert I had set. Luckily enough, I didn’t sleep in too much and miss out. I was just posting yesterday about how I missed out on an opportunity to capitalize on the ABBV shares I’ve been playing around with.
(Source)
The market is having a rather neutral day overall with the S&P 500 down 0.03% at the time of typing this. With ABBV heading higher, premiums for selling covered calls rose and allowed us to collect more income.
(Source - Google Finance)
I was able to get the trade right in time before it started to do some really funky action. Heading lower then sharply higher again. It is worth noting I didn’t see any particular news to get ABBV moving either - though it isn’t necessarily a particularly violent move at around a 1% change so far.
With this latest trade, I went with the March 5th, 2021 expiration with the $111 strike price. Collecting $0.43 or $43 per contract. This will expire in 9 days and annualized would return 15.71% if we were able to do this every 9 days. Of course, as you know we had to wait a bit here for ABBV to cooperate - so as I’ve been sharing this position and the outcome all along - we see that it isn’t always possible. If it was, then everyone would be using options!
Fidelity tells me that the probability that ABBV is above $111 by March 5th is rather low.
(Source - Fidelity)
Thus, the likelihood of us collecting the premium and keeping the shares is quite good. We’ll make out like a bandit - then possibly wash, rinse and repeat such as we have!
As a quick refresher, we originally ended up with the ABBV position due to writing a put at a strike of $110. Though I had shares in the company previously too - this is just the tale of this latest batch of shares. We collected $1.18 from writing that put. One of the reasons it was so high was because it was heading into their earnings.
Ultimately we were assigned as mentioned and then followed that trade up by collecting $0.28 writing a covered call. Collecting the latest $0.43 means we have collected a total of $1.89 now.
Surpassing the generous quarterly dividend payment of $1.30. And doing so from just January 14th when we first put that original trade on. If its not too early and my highly scientific calculation is correct; that should put it as just 41 days. This all means it would bring our cost on those shares down to $108.11. It’s a process but good things take time!
Disclosure: Long ABBV
This is not investment advice but for entertainment purposes only. Any decision to buy or sell is solely made by that individual. Speak with a financial professional to develop an investing plan that is right for your own objectives and goals.