Positive post-earnings behavior and a general upward drift of price action in the markets makes a strong argument for a bullish setup in AbbVie stock that investors can plan for well into the future.
The trade structure and instrument of choice for AbbVie stock today? Consider the leap ratio spread. That's a long call ratio spread with a slightly bullish formation that uses premium collected to finance a trade. It is like a long vertical spread but requires margin and holds a measure of risk if prices catapult to the north.
For this trade, we will use the current implied volatility in the option chains for March 2026, and use the size of the move estimated to determine the strike to sell in the future.
How To Use The Leap Ratio On AbbVie Stock
Currently this number is close to 50, so we will use that as the width of the spread. That means we will buy to open AbbVie 170-strike calls and sell to open 220 calls, both dated March 20, 2026.
The ratio spread requires $15.08 per set of options at the time of this writing, and will also require margin to transact the trade. The maximum gain comes by calculating the distance between strikes times 100, minus the cost of the spread times 100.
That amounts to $5,000 minus $1,508, or $3,492. Commissions also need to be taken into account as well. Therefore, the break-even price for this trade in AbbVie stock at expiration on this trade is 185.08.
The risk-margin requirement varies depending on portfolio type, but expect around $5,000 for each ratio. The ideal scenario is that AbbVie moves to 220 and stalls there into expiration.
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Keys To Managing The Trade
Here's how to manage your trade. First, identify key chart levels. The relative resistance zone sits right around 220, while support sits near 165.
And there several possible ways to leave the trade. One, sell the ratio spread when it has accumulated a predefined profit for your trading style. Two, set alerts for 200 and 220. If prices break these levels, allow up to a week to see price action fade, else exiting the trade is the most prudent.
Three, sell the ratio spread when it hits a predefined stop or risk limit for your trading style. And four, the more advanced trader could also roll the short strikes down if prices continue to move up over time, thereby increasing the profits and diminishing more of the margin requirements.
Anne-Marie Baiynd is a 25-year veteran trader of stocks, options and futures, and is the author of "The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology." You can find her on X at @AnneMarieTrades. She also appears on Sirius Business Radio, Investor's Business Daily, the Benzinga Pro platform and Topstep on YouTube.
