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.

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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
Puts
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