November 7th Options Now Available For Teva Pharmaceutical Industries (TEVA)

The article outlines two options strategies for Teva Pharmaceutical Industries Ltd. (TEVA), currently trading at $18.84, focusing on potential 'YieldBoost' returns. Selling an $18.50 strike put for $0.65 offers a 3.51% return (29.80% annualized) if it expires worthless (58% probability), effectively setting a $17.85 cost basis if assigned. Alternatively, a covered call strategy, involving buying TEVA and selling a $19.50 strike call for $0.52, could yield a 6.26% total return by November 7th if the stock is called away, or a 2.76% boost (23.41% annualized) if the call expires worthless (51% probability). The analysis highlights that implied volatility for these options (64-67%) significantly surpasses TEVA's trailing 12-month volatility of 47%.

Analysis

The article details two income-generating options strategies on Teva Pharmaceutical Industries Ltd. (TEVA), which is trading at $18.84 per share. One strategy is selling a cash-secured put at the $18.50 strike for a $0.65 premium, which creates an effective purchase price of $17.85 if assigned. If the option expires worthless, a scenario with a stated 58% probability, it yields a 3.51% return on cash, or 29.80% annualized. The alternative is a covered call strategy, selling the $19.50 strike call for a $0.52 premium, which would result in a 6.26% total return if the stock is called away by the November 7th expiration. This strategy has a 51% chance of expiring worthless, providing a 2.76% return boost (23.41% annualized) while capping upside potential. A critical insight is the elevated implied volatility in these options (64-67%) compared to the trailing twelve-month actual volatility of 47%, suggesting options are priced for greater price movement than has been observed historically, which in turn inflates the premiums available to sellers.

Key Decisions for Investors

• Investors bullish on TEVA who are seeking an entry point could consider selling the $18.50 put to either acquire the stock at an effective cost basis of $17.85 or generate a 29.80% annualized yield on the secured cash.
• Current shareholders with a moderately bullish outlook might find the covered call strategy at the $19.50 strike attractive for generating immediate income, but must be willing to forfeit upside above this price in exchange for the premium.
• The significant premium of implied volatility (64-67%) over historical volatility (47%) signals a favorable environment for selling options, but investors should be prepared for the higher price swings that the market is currently anticipating, which could challenge these positions.