Trade Highlight #4

This time, as promised I will showcase another kind of option trade, three option trades actually. I will explain you everything about my sold puts!

Last week we discussed my third Short Strangle trade, this time with a BioTechnology company . If you haven’t seen that post yet you can find it here.

Introduction

Here is the option that I want to highlight right now:
-P ABBV 17 JAN 2020 $60

All information about this trade can be found at number 87 via my options page.

As I said I traded three options like this. I sold them for slightly different premiums. For myself it was $3,45, for the others it was for $3,53 and $3,47.

Background information

Quite a huge bet on AbbVie right? Right! I even bought around a 100 shares on other accounts! So what happened and why did I decide to bet this big on AbbVie?

On Tuesday the 25th of June AbbVie announced they are buying Allergan for 60 billion Dollars. As AbbVie has been one of the companies I followed quite closely, I knew what it could mean to the company. In my view it’s a solution for the long term which put pressure on the stock price in the short term.

We saw the stock price drop around 16%. I have a general rule that a stock price movement of 10% or greater in any direction is an overreaction. I decided to act on it. Across the accounts I manage I already had a few shares of AbbVie as well as a 19 JUL 2019 put at $70. This put was negative after the news and so initially I decided to double down. Then I realised it was a great opportunity to do more. I sold two additional puts and then bought around a 100 shares.

Forward three days and I’ve bought back the three puts, all for a price of $2,11. The added shares are still moving up nicely and will provide the accounts with a huge amount of dividend. The yield is around 6,5%, for a dividend aristocrat!

Long story short

After a 16% drop in the stock price of AbbVie I decided to make a huge short term play. I sold three JAN 2020 $60 puts, fast forward three days and I’ve already bought them back. This option play gained me a total amount of €353,43 across all accounts. For me personally this is a net profit of €150,99.

For any questions regarding options, leave them down below in the comment section or simply hit me up on any of my social media channels!

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2 Comments

  1. Thanks for sharing! I already saw the ABBV trade show up in your options list and was hoping you’d share the rationale behind it.

    Too bad the stock price is already going up again. I would have loved to buy some shares for my portfolio when it was in the $65 range.

    • DutchIndependence

      Sure thing SD! It really went back up quickly didn’t it? I like the fact that I made a bit of money so quickly, but I was also still deciding if I was going to add shares to my own portfolio. Missed a chance… oh well.

      Better luck next time, right? 🙂

      DI

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