TEVA Analysis

Teva Pharmaceutical Industries Ltd. (TEVA)

Update 5/11/2017: TEVA zig-zagged sharply in response to its earnings announcement. I exited at  a $1.25 debit, or 29.4% of maximum potential profit.

Shares were down 1.7% over a day, or a -627% annual rate. The options position produced a 41.6% yield on debit for a +15,184% annual rate.

TEVA publishes earnings on Thursday before the opening bell.

I shall use the series of weekly options that trade for the last time eight days hence, on May 19.

Implied volatility stands at 39%, which is 3.9 times the VIX, a measure of the volatility of the S&P 500 index.

TEVA’s IV stands in the 54th percentile of its annual range and the peak of its most recent broad movement.

The price used for analysis was $31.04.

Premium: $1.77 Expire OTM  
TEVA-iron fly Strike Odds Delta
Long 35.00 92.8% 8
Break-even 33.27
Short 31.50 54.0% 49
Short 31.50 45.7% 51
Break-even 29.77
Long 28.00 89.36 9

The premium is 51% of the width of the position’s wings.

The risk/reward ratio is 1:1.

Decision for My Account

I have entered a position on TEVA as described above. The stock at the time of entry was priced at $31.41.

By Tim Bovee, Portland, Oregon, May 10, 2017

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