I bought a bear spread on Abbot (ABT)
music selection: “Perfect Way” — Scritti Politti
weigh-in: 222.6 +2.8 – too much Superb Owl over indulgence.
First a little cleanup. My bear spread in Genuine Parts (GPC) had become threatened with the underlying more than halfway between my low and high strikes. The short term momentum was against me and the RSI 56 indicated the rally had room to run. I decided to preserve time value and exit the position for a loss. I had 3,771 of capital in the trade. I lost 38% of it or 1,421 over 8 days. Some options bloggers conveniently fail to disclose their losers. I go with full transparency. February is still on pace for nearly 5,500 in closed profits however.
Abbot (ABT) is a large pharmaceutical company and a Dividend Aristocrat. It should be slow moving and makes a good target for in the money spreads. With ABT at 125.49, I elected to buy the 135/140 bear put spread. This gives me 7.58% downside protection. I got 4.50 per share pricing on the 19MAR2021 expiry spread. I bought 11 spreads putting 4,950 of capital at risk. If the downside protection of about 7.5 percent is not breach over the 40 days the trade will be in force, I will book the full profit of 550 dollars. That is good for 11.1% or 101% annualized.
Devour your prey raptors!