Covered Calls on Teva Pharmaceutical (TEVA)
Teva Pharmaceutical (TEVA) was the very first stock I purchased back in 1996, and have held it intermittently since then. It was initially a generic drug provider, and remains one of the world’s largest generic pharma companies, also the result of buying sprees. However, it develops drugs also. Copaxone was its first, which treats multiple sclerosis and accounted for 20% of company revenues in 2013. It also received a favorable Supreme Court ruling regarding its patent.
TEVA trades in-between strike prices at $53.07. One option is to sell the May 55 calls for $1.15. This provides a solid 2.05% return for a seven-week holding period if the stock isn’t called away. If it is, then you book another $1.93 in capital gains as well, bringing your total return to $3.08. That’s a 5.8% return, or 43% annualized.
Sell four contracts for $460, which brings us to $904.