October 8, 2022

Dear Friend,

Today we bring you our Option Trade of the Week, an idea generated by our trading team, for your consideration. But first, I would like to remind you that our proprietary 10K Strategy has generated average annual gains of 60% for the past five years in actual brokerage accounts (including all commissions) carried out for our subscribers.  Over the first nine months of 2022, a dismal year for the market, our actual composite average was a 1% gain.  While this was clearly disappointing compared to our earlier results, it was considerably better than the 25%+ losses incurred by the major market indices. Isn’t it time you learned all the details of this unique options strategy by becoming a Terry’s Tips Insider?  Invest a total of $98 in yourself.  You are worth it.  Click Here

ABBV Not Immune to a Pullback

Pharmaceutical giant AbbVie (ABBV) reported mixed results in its recent earnings report. While earnings beat the consensus estimate, revenue fell short. Notably, the company’s immunology portfolio, which includes popular TV-ad drugs such as Humira, fell short of expectations. ABBV’s CEO cited the usual (and seemingly generic) “economic headwinds” as hurting the company’s aesthetic business (ABBVIE makes Botox).

While analysts didn’t hit ABBV with any downgrades, there was a flurry of target price decreases. The average estimate is now $157, about 8% above Friday’s close. That doesn’t seem unreasonable, nor is the average analyst rating, which has been slipping into the buy-hold region.

On the charts, ABBV’s earnings knocked the stock below its 200-day moving average, a  trendline that has provided solid resistance to any rally attempts other than a brief spurt  prior to earnings. This trade is thus a bet that the stock will continue to trade sideways as it has for the past six months, with the 200-day defining the upper rail of the trading range. Note that the short call of our spread is above the 200-day, so the stock will have to break this resistance to move the spread into the money.

If you agree that ABBV will continue to respect the 200-day (blue line), consider the following trade that relies on the stock staying below $150 (red line) through expiration in six weeks:

Buy to Open the ABBV 16 Dec 155 call (ABBV221216C155)
Sell to Open the ABBV 16 Dec 150 call (ABBV221216C150) for a credit of $1.98 (selling a vertical)

This credit is $0.02 less than the mid-point price of the spread at Monday’s $148.10 close. Unless ABBV falls quickly, you should be able to get close to that price.

The commission on this trade should be no more than $1.30 per spread. Each spread would then yield $196.80. This trade reduces your buying power by $500, making your net investment $303.20 per spread ($500 - $196.80). If ABBV closes below $150 on Dec. 16, both options will expire worthless and your return on the spread would be 65% ($196.80/$303.20).    

Testimonial of the Week

I’ve always had the greatest respect for Terry’s experience and teachings. There are numerous individuals now trying to sell option schemes. This new guy sending out emails, (name deleted), charging $5000 knows just enough to be dangerous–his free videos are bogus! In my humble opinion, Terry’s one of the few that’s got it right.

~ Robert Yates

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Happy trading,

Terry