Downside Of A Passive Dividend Portfolio And Latest Premium Collected On AbbVie
CEFs, Dividend Growth Investing, Dividend Investing, ETF investing
Seeking Alpha Analyst Since 2011
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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!
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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.
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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.
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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!
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(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.
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