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Downside Of A Passive Dividend Portfolio And Latest Premium Collected On AbbVie

Feb. 28, 2021 3:55 PM ETAbbVie Inc. (ABBV)4 Comments
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CEFs, Dividend Growth Investing, Dividend Investing, ETF investing

Seeking Alpha Analyst Since 2011

Nick Ackerman is an avid student of the markets and has been investing in his own accounts for over 14 years. He is a former Financial Advisor and has previously qualified for holding Series 7 and Series 66 licenses. These licenses also specifically qualified him for the role of Registered Investment Adviser (RIA), i.e., he was registered as a fiduciary and could manage assets for a fee and give advice. Since then he has continued with his passion for investing through writing for Seeking Alpha, providing his knowledge, opinions, and insights of the investing world. His specific focus is on closed-end funds as an attractive way to achieve income as well as general financial planning strategies towards achieving one’s long term financial goals.


I provide my work regularly to CEF/ETF Income Laboratory with articles that have an exclusivity period, this is noted in such articles. CEF/ETF Income Laboratory is a Marketplace Service provided by Stanford Chemist, right here on Seeking Alpha.

Last week I had touched on the downside of being a passive dividend investor - the link to the full article can be found here!


One of the downsides of having portfolios constructed mostly of dividend payers is basically everything is automated. I don’t have to track positions every day to see how they are doing; wondering if I have to sell, what to buy or what position to switch to. It all just works on its own. I don’t have to watch my portfolio every single day - because I know my positions are working for me - providing dividends monthly or quarterly.


Therein lies the issue too. A rock-solid dividend payer like AbbVie (ABBV) that I’ve been writing calls on means I’m not necessarily watching the position every day. Though I really probably should have been considering I know I’m wanting to write calls against the position again to either lower the cost basis of the shares again or get the position called away - then use that cash to write puts again to repeat the cycle all over.

So, what am I talking bout? Yesterday ABBV jumped to over $107 per share. To roughly $107.50 at the peak midday. It seems like a successful late-stage study announcement helped provide some optimism for shares of the company. Anything to help break its dependence on Humira is a win.


Luckily, I didn't have to wait long as an opportunity sprung up the next day to collect more premium from writing calls on AbbVie (ABBV). That full article can be found here!


(Source - Google Finance)

I was able to get the trade right in time before it started to do some really funky action. Heading lower then sharply higher again. It is worth noting I didn’t see any particular news to get ABBV moving either - though it isn’t necessarily a particularly violent move at around a 1% change so far.

With this latest trade, I went with the March 5th, 2021 expiration with the $111 strike price. Collecting $0.43 or $43 per contract. This will expire in 9 days and annualized would return 15.71% if we were able to do this every 9 days. Of course, as you know we had to wait a bit here for ABBV to cooperate - so as I’ve been sharing this position and the outcome all along - we see that it isn’t always possible. If it was, then everyone would be using options!

Analyst's Disclosure: I am/we are long ABBV.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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