Legged Spread With AbbVie Delivers Quadruple-Digit Gains
Last week, some War Room members locked in profits ranging from 1,350% to 3,700%.
That wasn’t a fluke…
It was the result of a unique type of trade that you may never find anywhere else. It’s called a “legged spread”…
Sounds weird, I know…
But hear me out…
A couple of months ago, I recommended members buy long-term equity anticipation securities (LEAPS) on AbbVie (NYSE: ABBV). The recommendation was for the $77.50 calls. Members bought in for $4.60. A couple of days later, AbbVie moved up about 5%.
Members’ LEAPS jumped by 20% to 30%…
This is what I told members in The War Room:
I have two recommendations for you (one for those of you who want to enter a spread and one for those of you who don’t). Please observe the limits or you’ll basically ruin it for everyone else. There is no rush here. If you get $0.05 or $0.10 more or less, that is fine too. But try to get the higher price first before making adjustments.
1) If you don’t want to enter a spread, SELL TO CLOSE the ABBV Jan 2021 $77.50 calls (ABBV JAN 2021 $77.50C) for $5.25 or higher. Please post your fills (the current bid is $5.45, but it’s weak. Still try to go between the bid and offer to start and work your way lower).
2) I will post the spread trade soon. I am waiting for more bids to line up.
This was the second time in a matter of weeks that members cashed in on AbbVie…
But this time, I wanted to shoot for a bigger target, and that target opened up within a few minutes of the post above. Here’s what I said:
For those of you who want to remain in the position via a spread, SELL TO OPEN THE ABBV JAN 2021 $80 (ABBV JAN 2021 $80C) calls at $4.60 OR HIGHER, good for the day. This will give us a zero-cost free ride on the position! TAKE YOUR TIME. We will follow the spread position in the portfolio only after today.
I recommended selling the $80 calls against the $77.50 calls that members already owned…
This is called a spread…
A spread is the distance between two points – in this case, the distance between two strike prices. What is unique about this trade is that members entered the spread after the trade was already in play, which is called a legged spread. A normal spread would be entered into at the time of the first trade.
As you can see from this member’s post, that’s exactly what he did:
“ABBV Filled at $4.60. I now have 5 Cents in the trade.” – Christopher S.
On November 8, the same War Room member wrote this:
“Placed a GTC $1.65 and will patiently wait for the price to come back to me.” – Christopher S.
And on November 12:
“I sold my position for $1.65.” – Christopher S.
Here’s what another War Room member had to say:
“ABBV stock finally filled at $1.35, hahaha, ohh well:)… so no cost trade filled @ $13.5, I don’t even know how to calculate that! 1,350% gain???” – Michael E.
(The moderator pointed out that the gain for this member’s trade was actually 2,700%!)
Here was the setup:
We had $0.05 at risk to make a maximum of $2.50 (the spread between $77.50 and $80). That’s a potential gain of 5,000% (if we held on for another 15 months).
Last week, AbbVie rallied sharply on the back of great earnings and more new drug approvals. The profit from the spread reached about $1.85. That was good enough for me!
Why wait another year or so for an extra $0.75, when the bulk of the gains are in the bag?
So I issued the order to close the spread. And members were able to cash in gains of up to 3,700%…
Some members are still holding on for more!
Action Plan: We have another quadruple-digit gain waiting to go with our Bunge Limited trade. These are the types of trades I shoot for in The War Room when I recommend trading LEAPS.
You could be there for the next quadruple-digit gain by joining me in The War Room now!
About Karim Rahemtulla
With more than 20 years of experience, Karim has mastered the subtle art of options trading. What we admire about him is his ability to score huge gains while minimizing the massive amount of risk that often comes with options. Beyond his expertise in options trading, he is also the author of the best-selling book Where in the World Should I Invest? He publishes weekly about smart speculation in his latest free e-letter, Trade of the Day.