Option Trade: Increase Your Income With This Covered Call Strategy

TL;DR

Learn how to generate income by selling call options on AbbVie, a high-yielding stock in the S&P 500, while minimizing risk.

Transcript

[Applause] hey option traders for today's strategy we're going to take a look at selling call option in abdi abbvie is currently one of the highest yielding stocks in the s p 500 with a dividend yield of 4.9 percent abby is pulled back in recent weeks following the food and drug administration's ruling that a warning label must be added to one of i... Read More

Key Insights

• ✋ AbbVie is a high-yielding stock in the S&P 500 with a dividend yield of 4.9%.
• 🛀 Despite a recent setback, AbbVie has shown solid earnings growth.
• ↩️ Selling call options on AbbVie can generate additional income and potentially earn a 5.2% return.
• ✋ Covered calls and cash secured puts are strategies that can be used to increase income on high dividend stocks.

Questions & Answers

Q: What is AbbVie's current dividend yield and what recent setback did it face?

AbbVie's dividend yield is 4.9%, and it faced a setback due to an FDA ruling that required a warning label on one of its drugs.

Q: How can income-focused investors enhance the yield on AbbVie stock?

Income-focused investors can enhance the yield on AbbVie stock by selling covered call options, generating additional income.

Q: What is the potential return from selling a call option with a strike price of 110 on AbbVie?

If AbbVie closes above 110 on the expiration date, the investor will earn a total profit of $555, which includes the gain from the shares and the premium received from selling the call option.

Q: What is the risk associated with selling call options on AbbVie stock?

The risk is that AbbVie stock might continue to drop, potentially wiping out any gains made from selling the call option.

Summary & Key Takeaways

• AbbVie is a high-yielding stock with a dividend yield of 4.9% but has faced setbacks due to a recent FDA ruling.

• Despite the setback, AbbVie has shown solid earnings growth, making it attractive for income-focused investors.

• By selling a call option on AbbVie with a strike price of 110, investors can generate income and potentially earn a 5.2% return if the stock closes above 110 on expiration.