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.
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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.
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