January 29th Option Expiration Results, What's Next
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The results are in!
The AT&T (T) put options I had written expired worthless. Thus, ended up pocketing the full $0.41 in premium.
On the other hand, the puts I had written on AbbVie (ABBV) I did get assigned as market volatility and bad news hit the stock. Sometimes it’s easy to forget that ABBV is a bit of a biotech stock with the generous dividend yield that it offers. In their words - a “biopharmaceutical company.” Many biotech stocks don’t pay dividends at all as they need all that capital to develop. That’s where the pharmaceutical part of ABBV helps to keep the business a bit more stable to offer the growing yield they do.
(Source - Google Finance)
The bad news for ABBV, besides the market volatility, actually came from Pfizer (PFE). I’ll sum up as quickly as I can. PFE had bad news related to the safety of a JAK inhibitor Xeljanz. ABBV’s Rinvoq is also a JAK drug. It could hit some similar problems, and this is one of the drugs they were counting on to help offset Humira dependence. To sum it up simply. In Q3, Rinvoq had greater than 100% revenue growth year-over-year.
What Now?
(Source)
The next step for T would be to go ahead and write some more puts against it. I will assess over the next few weeks periodically for an opportunity I find attractive. The latest market volatility could definitely help collect higher premiums.
For ABBV, we are in a different boat. They announce their earnings on February 3rd pre-market. I plan to hold my shares through that point and assess the situation from there. They have a history of regularly beating their earnings estimates, though that doesn’t always translate into a higher price if investors see something they don’t like.
The strike price was $110 and we collected $1.18 per contract. So we are sitting at paper losses at the moment. For these shares, any time they are below $108.82 will be looking at unrealized losses. We could probably write covered calls at a strike price of $108 and come out slightly ahead after collecting a premium. That isn’t good enough for me, I’ll be content waiting until I can write calls at a strike of $110 or greater - and collect a reasonable premium for doing so.
February 3rd will give me a better indication of just how long I might be sitting on these new shares to my portfolio. Increasing share price could = a shorter time frame. Further declines could = sitting on a 5%+ yielder for a long time.
Disclosure: Long T, 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.