Teva Pharmaceutical (TEVA) 11/10/09 PriceWatch Alert With 2.35% Downside Protection

Posted: Tuesday, November 10, 2009 8:39 AM EDT
By: Market Intelligence Center Staff

Teva Pharmaceutical (NasdaqNM: TEVA) closed yesterday at $53.20. So far the stock has hit a 52-week low of $39.75 and 52-week high of $54.95. Teva Pharmaceutical stock has been showing support around 51.57 and resistance in the 54.07 range. Technical indicators for the stock are Bullish and S&P gives TEVA a very positive 5 STAR (out of 5) strong buy rating. TEVA appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Jan '10 55 covered call (TVQ AK) for a net debit in the $51.95 area. That is also the break even stock price for this trade. This covered call has a 67 day duration, provides 2.35% downside protection and a 5.87% assigned return rate for a 31.98% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the TEVA Jan '11 40 Call (OQV AH) and selling the Jan '10 55 call (TVQ AK) for a $13.00 debit. The trade has a 67 day life and would provide 0.38% downside protection and a 15.38% assigned return rate for an 84.00% annualized return rate (for comparison purposes only). Teva Pharmaceutical has a current annual dividend yield of 0.87%. [ATU-Seven Summits Research]