Option Investor

December Option Position

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Abbott Laboratories (ABT) engages in the development, manufacture, and sale of health care products worldwide. It operates in four segments: Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Vascular Products. The stock recently dropped on reports that TEVA would be producing a generic cholesterol drug. If your strategy is to get assigned stocks, then the 2.75% dividend yield should be attractive. Basically, I look to dividend paying stocks so we get paid to wait for the market's rebound.

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We are going to sell two of the December 47.5 Puts for a target price of $0.85 per contract. ABT became interesting at the close of Friday because the stock price closed above the 8 day exponential moving average. I have drawn a line at the spike low from 11/21 at $48.24. The technical stop is set at $48.10. The initial margin requirement for two contracts is about $1,100.

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