Today a Covered Calls position was established in Halozyme Therapeutics Inc. (ticker HALO) when four hundred shares were purchased at $41.54 and four April 19th, 2024 Call options were sold at $2.86 per share at the $40.00 strike price. So, the corresponding potential time value (aka extrinsic value) profit potential is $1.32 per share = [$2.86 Call options premium - ($41.54 stock purchase price - $40.00 strike price)]. An in-the-money Covered Calls position was established with the Delta of the Calls at 65.8 when this buy/write limit order transaction was executed, which approximates the probability of assignment on the April 19th, 2024 options expiration date. Halozyme does not pay a dividend and importantly, their next quarterly earnings report on May 7th, 2024 is after the April 19th, 2024 options expiration date.
A comparison between whether a Covered Calls or a Cash-Secured Puts position would be preferable was made shortly before I entered this order. The decision was an easy one since the time value for the Covered Calls of $1.32 was substantially better than the $1.10 (midpoint of the $1.00/$1/20 bid/ask price) for the comparable Puts.
Halozyme Therapeutics is a small-cap biotechnology company that has a range of auto-injector devices for subcutaneous and intramuscular delivery to patients. They have license agreements in partnership with several drug companies with 7 currently approved products and 10 expected by 2025. When co-formulated with drugs, their products have the potential to reduce the treatment burden for patients (minutes for subcutaneous injections versus hours for IV infusions). Also, I am very impressed by the leadership qualities of their CEO Helen Torley.
If interested in additional information on Halozyme, their most recent corporate slides presented in conjunction with their Q4 2023 conference call on 2/20/2024 are
here.
As shown below, Halozyme also meets all twelve filters in my Stock Rover Overall stock screener.
Halozyme Therapeutics Inc. (HALO) -- New Covered Calls Position
The net debit buy/write limit order was executed as follows:
3/13/2024 Bought 400 shares of Halozyme Therapeutics stock @ $41.54 per share.
3/13/2024 Sold 4 HALO April 19th, 2024 $40.00 Call options @ $2.86 per share. Note: the Implied Volatility of the Calls was 35.2 when this position was established.
A possible overall performance results (including commissions) for this position if the position is in-the-money on the options expiration date is as follows:
Halozyme Covered Calls Net Investment: $15,474.68
= ($41.54 - $2.86) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$1,141.32
= ($2.86 * 400 shares) - $2.68 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If Halozyme stock is above the $40.00 strike price at the April 19th options expiration date): -$616.00
= ($40.00 strike price - $41.54 stock purchase price) * 400 shares
Potential Total Net Profit (If in-the-money and therefore assigned at expiration): +$525.32
= (+$1,141.32 options income + $0.00 dividend income - $616.00 capital appreciation)
Potential Absolute Return-on-Investment (If stock price is in-the-money and therefore assigned on the 4/19/2024 options expiration date): +3.4% = +$525.32/$15,474.68
Potential Equivalent Annualized-Return-on-Investment: +33.5%
= (+$525.32/$15,474.68) * (365/37 days)
