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Wednesday, March 27, 2013

Established Teva Pharmaceutical Industries Covered Calls Position

Today, a new covered calls position was established in Teva Pharmaceutical Industries Ltd (Ticker Symbol TEVA) with an April 2013 options expiration as follows:

Teva Pharmaceutical Industries Ltd (TEVA) -- New Covered Calls Position
The transactions were as follows:
3/27/2013 Bought 300 TEVA shares @ $39.70
3/27/2013 Sold 3 TEVA Apr2013 $40.00 Call Options @ $.64
Note: The price of TEVA was $39.77 when the options were sold

A possible overall performance result (including commissions) for this Teva Pharmaceutical Industries Ltd  covered calls position is as follows:
Stock Purchase Cost: $11,918.95
= ($39.70*300+$8.95 commission)

Net Profit:
(a) Options Income: +$180.80
= 300*$.64 - $11.20 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If TEVA price unchanged at $39.70): -$8.95
= ($39.70-$39.70)*300 - $8.95 commissions
(c) Capital Appreciation (If TEVA assigned at $40.00): +$81.05 = ($40.00-$39.70)*300 - $8.95 commissions

Total Net Profit (If TEVA price unchanged at $39.70): +$171.85
= (+$180.80 +$0.00 -$8.95)
Total Net Profit (If TEVA assigned at $40.00): +$261.85 = (+$180.80 +$0.00 +$81.05)

Absolute Return if Price Unchanged at $39.70: +1.4%
= +$171.85/$11,918.95
Annualized Return if Price Unchanged at $39.70: +21.1%
= (+$171.85/$11,918.95)*(365/25 days)

Absolute Return if Assigned (at $40.00): +2.2% = +$261.85/$11,918.95
Annualized Return If Assigned (ARIA): +32.1%
= (+$261.85/$11,918.95)*(365/25 days)