A short put and a bull call spread.

music selection:  “Steppin’ Out” — Joe Jackson

weigh-in: 218.2 (0.8)

First up is a short put in AbbVie (ABBV).  ABBV has been recently known as a one trick pony with substantially all profits coming from Humira.  They have made moves to diversify with an acquisition and have a nice pipeline of new drugs in Phase III trials that will all likely be billion dollar sellers.  They won’t completely replace Humira when it goes off patent but it will be close and their cash flow should continue to grow.

I sold ABBV200821P00096000 for 2.06 a share.  The trade will be in force for about 26 days and yields an expected 30.12% annualized.  At the same time, the trade enjoys 3.69% downside protection.

I also bought a bull call spread in Wal-Mart (WMT).  This has been an essential business that has done brisk sales during COVID-19.  In recent years, the company was threatened by Amazon.  WMT acquired an e-commerce firm to obtain its IP and expertise.  This was applied to Walmart.com which is now a popular online shopping portal.  Because of Wal-Mart’s enormous bricks and mortar logistics footprint, they are able to compete with Amazon and attack its weaknesses.  Amazon has acquired Whole Foods, perhaps in retaliation but it will be decades before they can match WMT’s store count.

I bought the 4SEP2020 expiry 120 call and sold the 125 call.  I got a fill at exactly four dollars.  The trade will be in force for 40 days and enjoys 5.05% downside protection before profits are threatened.  Should 125 not be breached to the downside, the full profit of 100 per contract will be earned. That is good for a 25% or 294% annualized.

Devour your prey raptors!

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Monday trades with yields up to 294%

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One thought on “Monday trades with yields up to 294%

  • July 31, 2020 at 4:06 pm
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    I humbly suggest a couple of new metrics for this blog: Bullish Dollars at Stake and Bearish Dollars at Stake. Bullish dollars at stake would include cash used to secure short puts, the current value of long calls, or the maximum possible loss from bull spreads. Bearish Dollars at Stake would be the opposite – max losses from bear spreads, the current value of long puts, etc.

    I’m most curious about the ratio of bullish bs bearish dollars at stake. A category for neutral dollars may also be appropriate.

    Reply

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