Three-Legged Bull Eyes Upside Potential in TEVA Shares

TEVA – Teva Pharmaceutical Industries Ltd. – Shares of the Israel-based manufacturer of generic and branded drugs are up 0.20% as of 11:45 am ET to stand at $52.70 despite reports that the firm failed to win U.S. approval for a medicine comparable to Amgen’s Neupogen, a drug used to fight infections in chemotherapy. TEVA popped up on our scanners after one options strategist initiated a three-legged bullish play in the November contract. The investor essentially sold put options in order to partially offset the cost of buying a call spread. The trader picked up 5,000 in-the-money calls at the November $50 strike for a premium of $3.75 each, sold 5,000 calls at the higher November $55 strike at a premium of $0.93 apiece, and shed 5,000 puts at the November $50 strike for premium of $0.92 a-pop. Net premium paid to establish the spread amounts to $1.90 per contract. Thus, the bullish player is poised to profit should TEVA’s shares trade above the effective breakeven price of $51.90 through November expiration. Maximum potential profits of $3.10 per contract pad the investor’s wallet if the drug maker’s shares rally 4.40% over the current price of $52.70 to exceed $55.00 by expiration day.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.