Abbott Laboratories (ABT)

Update 10/19/2022: I exited my short bull put vertical spread on ABT, 23 days before expiration, for a $3.35 debit per contract/share, a loss before fees of $172 per contract. Shares were trading at $98.15, down $7.29 from the entry level.

The Implied Volatility Rank at exit was 73.7%, up 6.2 points from the entry level.

I exited on the day after entry because the position moved in the direction opposite that anticipated in the trade, reaching 99.4% of maximum potential loss.

Shares declined by 6.9% over one day for a -2,524% annual rate. The options position produced a 51.3% loss for a -18,740% annual rate.

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I have entered a short bull put vertical spread on ABT, using options that trade for the last time 31 days hence, on November18. The premium is a $1.63 credit per contract share and the stock at the time of entry was priced at $105.44.

The Implied Volatility Ratio stood at 67.5%.

Premium:	$1.63	Expire OTM
ABT-bull put spread	Strike	Odds	Delta
Puts
Long	100.00	68.0%	28
Break-even	106.63	58.0%	37.5
Short	105.00	48.0%	47

The premium is 65.2% of the width of the position’s short/long spread. The profit zone covers a 1.1% move to the downside and an unlimited move to the upside.

The risk/reward ratio is 2.1:1, with maximum risk of $337 and maximum reward of $163 per contract.

How I chose the trade. The trade was placed to coincide with ABT’s earnings announcement, before the opening bell on the day after entry. The short strikes were set to coincide with the expected move of $2.80 either way, based on options pricing, which gives a price range of $102.64 to $108.24. The Zacks Investment Research earnings surprise predictor gave ABT a score of 0.98%, with a rank of Hold (3). The analysts’ consensus is that ABT will announce earnings of $0.90 per share.

By Tim Bovee, Portland, Oregon, October 18, 2022

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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