May 7th Option Expiration Results - Farewell, AbbVie
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On the back of a good earnings report for AbbVie (ABBV) shares header higher. Though it was a bit of a day as we touched on previously, it still had ABBV heading higher. Well above our $111 strike that we wrote the calls on. We were assigned and these shares were called away.
This highlights the “downside” of the covered call strategy. Shares of ABBV closed yesterday at $115.75 per share - though we sold out at $111. Had we simply kept the position, we would have been able to sell out at this higher price. We previously discussed ‘options’ an investor could have implemented to get out of the position or adjust to make it less likely to be called away. Ultimately I wanted the cash back as we have had a successful run with ABBV; it seemed time to take the profits.
The other thing here is, it could have gone either way. A bad earnings report could have sent the shares tumbling - or even a good earnings report that investors just didn’t like for one reason or another. I would also remind you that I didn’t write calls on my entire position, but the initial “sleeve” of shares that we were put when our cash-secured puts were assigned.
(Source - Google Finance)
That being said, I believe this was still a pretty big success. I had remarked on a couple of occasions how fortunate it seemed we had been with ABBV since it showed such little volatility. ABBV isn’t always the most stable in terms of its share price.
Here was our final result on this run:
several written calls and the original put contracted netted the total premium collected of $4.43
put shares of ABBV at $110, shares called away at $111 - $1 in appreciation
held through the ex-dividend date so will collect the dividend of $1.30
(Source)
Total per share return of $6.73 or $673 for every 100 shares. The total capital we laid down for this would have been $11,000 per contract (that $110 original assignment.) That works out to a near 6.12% return. Not too bad considering we did this in less than a year.
We can go all the way back to January 14th, 2021 when we started this whole series of trades. This interesting website tells me that it took us 9,763,200 seconds for all of this to play out. Additionally, just as interesting, it worked out to 30.96% of 2021. Or, for more practical purposes of calculating annualized returns, but not really as fun, 113 days.
(Source - timeanddate.com)
This had worked out to an impressive annualized return of 19.77% if we could replicate these same exact trades every 113 days. Of course, we know that isn’t always possible. But we certainly will be keeping an eye out and with this cash back into our account - we have plenty of capital to either spread the love on several other positions or perhaps ABBV makes the most sense again.
We will be revisiting our options next week. The one big downside I’ve been noticing is just how little volatility there seems to be. Sure, we got a couple of days where tech took a dive, but it was hardly anything and everything just started heading higher again.
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.