NEW UCPTD Trade Alert - ABBV - Covered Call

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DISCLAIMER: This trade is based on this date. I'm not suggesting a move up or down. I'm showing my trade that I have already done. I'm not recommending this stock as a purchase/trade. Think of it like this, I'm 'Showing you the World thru my Eyes'.
NEW TRADE ALERT
Tuesday, February 11, 2020
Covered Call Trade opened using a Standard Covered Call Strategy
NEW Covered Call position with Abbvie Inc. (ABBV) this week
Brief Description of WHY I did this trade and my expectations
Notice that my calculations below are not based on the current stock price of ABBV rather instead when I purchased the stock + the dividend I received ... reason, I bought the stock for a CCW+DIV Capture trade ... I bought the stock but the price action didn't materialize for a CCW so I held the stock ... which lucky me, caught a little wind under its sails and is now trading higher from my stock purchase price. With my investment now gaining some 8% in this very short window and ABBV trading above its 50 SMA ... I feel that it might PULL BACK a bit and I can take advantage of TIME DECAY with a 3 day option expiring Friday Feb 14th. My Expectations are that the stock will run out of gas and NOT stay above its current stock price of $95.98 (price at time of this posting ... time value will shrink and even IF ABBV trades above my strike $95 (ITM) I can buy back this option CHEAPER by Friday, pocket the difference for a short term, couple hundred buck profit and look to do it again.... if my shares are taken ... a very profitable 11% trade in this very short window. ALSO NOTICE > DELTA says this option has a 65% of finishing ITM and that's probably because this trade is an IN THE MONEY trade ... I'm guessing not based on what I've written above :)
If my shares are taken at expiration, this is the CCW KRUM!				Yahoo Prem
TRADE KRUM!	DAYS	Cash on Cash %	Annualized
$1,756.00	3	9.88%	1201.61%
Yahoo Prem thinks the stock is FairValued'which sets up a nice sideways trade allowing me to write an ATM or OTM Covered Call and expect to make MAX Profit having my shares taken away, we move on!
MAX PROFIT PROJECTION - See below the profit on the other possible outcomes
COMPANY	SYMBOL	SHARES	PRICE	TOTAL COST
Abbvie Inc.	ABBV	200	$88.90	$17,780.00
EXPIRATION DATE	DAYS	STRIKE	OPTION	CoC % GAIN
Feb-14	3	$95.00	$1.50	9.88%
DIVIDEND	DIVIDEND GAIN	OPTION GAIN	STOCK GAIN	TOTAL KRUM
$1.18	$236.00	$300.00	$1,220.00	$1,756.00
All calculations above are based on collecting [ Stock move + CCW + DIV if offered]
Yes, they offer investors a dividend but *NOT* during this trade time frame
Did this trade meet the Golden Rules?
SP500 type	Earnings?	Dividend	Volume?	Open Interest?
Yes they are	No they do not	Yes they do	Yes they do	Yes > 100
Read notes above > NO EX DATE is coming but this trade factors in the dividend I collected :)
Important Trade Details
Trade details - 2 contract(s), Strike Price $95 , Premium of $1.5, with a 43875 expiration date receiving a total credit of $300 per share
Already had 200 shares for $88.9 , $17780 , total investment.
The will be a 3 day trade
This In the Money (ITM) Covered Call trade has a potential Cash On Cash Return of :
Covered Call - if shares are taken I make $7.59999999999999 per share, or 8.55 %- Annualized 1040.12%
Covered Call - if shares are not taken option expires worthless I make just $1.5 per share, or 1.69 %- Annualized 205.29%
Dividend during this 3 day period? No EX-Dividend date is - N/A- N/A
Earnings Report during this 3 day period? No Earnings Report is (~) date of - N/A- N/A
DOWNSIDE PROTECTION SUMMARY (if this trade goes bad)
CURRENT STOCK PRICE	STRIKE PRICE	D/P PRICE	$ PROTECTION	% PROTECTION
$96.00	$95.00	$93.50	$2.50	2.60%
Current Stock Price	Implied Volatility	Imp Vol (+)	Imp Vol (-)	DELTA
$88.90	26.97%	$100.89	$76.91	0.65
		$100.89
$88.90			With Implied Volatility being 0.13485% to reach $100.888165 in this 3 day period, with this Covered CallStrike Im hoping the stock moves just 0.0662335770528684% of that 0.2697% Implied Volatility
		$76.91
What is Implied Volatility? - Implied volatility shows how much movement the market is expecting in the future. Options with high levels of implied volatility suggest that investors in the underlying stocks are expecting a big move in one direction or the other. It could also mean there is an event coming up soon that may cause a big rally or a huge sell-off. However, implied volatility is only one piece of the puzzle when putting together an options trading strategy. - source: Zacks Investment Research
This Covered Call trade has 2 typical outcomes
CSP - Outcome #1 - the stock does not close at or below the strike price. If this Cash Secured Put option trades above the strike price the CSP buyer will not give me the shares then what they can sell them for on the open market. I keep the premium and am not assigned the shares. Trade expires worthless
CC - Outcome #2 - the stock does not move above my strike price of $160 at expiration, I do not have my shares taken away and I make only the option premium of $4.4 per share for this 32 day trade. I keep my shares.
Further research with - Using charts for technical analysis, Dividend information and Earnings Report Date
RSI, SUPPORT LINES	KELTNAR, OBV		DIVIDEND	EARNINGS REPORT
View Chart-ABBV	View Chart-ABBV		Verify-ABBV	Verify-ABBV
			No	No
				- N/A- N/A
Always look at a companies chart ... it tells a story and that story could be UP or DOWN
How I could 'Manage' this trade should the stock rise or fall prior to expiration
I could manage this Covered Call - #1 - The stock moves and closes on expiration above my strike price. My shares will be given assigned to the Call Buyer, I will be given cash for my shares (strike price)
I could manage this Covered Call - #2 - The stock does not close at or above my strike by expiration, I will likely not have my shares taken from me. I keep my shares, I keep the Covered Call premium. Trade ends. Shares become available to trade.
I could manage this Covered Call - #3 - Regardless of where the stock moves during the Covered Call timeframe, a news event or Ex-Date prompts the Call buyer or market maker to take my shares before expiration. Most common situation, the stock has moved up and now trades near or above the strike price making it profitable to exercise the Call option early for the Call Buyer to collect the dividend.
Education Corner
Great Covered Call video posted at
Covered Call - Description - A covered call is a financial market transaction in which the seller of call options owns the corresponding amount of the underlying instrument, such as shares of a stock or other securities. ... writing (i.e. selling) a call generates income in the form of the premium paid by the option buyer. Source - https://en.wikipedia.org/wiki/Covered_call
Disclaimer - Yes - at the time of this posting I do have a position in this equity. By posting this I am by no means recommending this equity and am not front running for its performance. I have risked my own money and am accountable for the trade results.
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