In the blog article, “Wal-Mart (WMT) – Generic Drugs – Options Investing”, we analyzed the generic drug industry in light of Wal-Mart’s (WMT) introduction of $4 generic drugs.
In our article, “Generic Drug Investing Returns +1.3% in Nov.”, we showed the profitability of the strategy, and in article, “Generic Drug Investing Returns +2.2% in Dec 06”, we selected covered calls positions for January of 2007 and all of the positions were fully profitable returning a very nice average return of +4.6%.
With Wal-Mart’s $4 generic drug offering, we are still bullish on the generic drug players. Using PowerOptions SmartSearchXL stock options search tool we found the following generic drug covered calls stock option position for stock options expiration in February of 2007:
| SmartSearchXL covered call search for January 24 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stock Sym |
Stock Price |
Option Sym |
Expire &Strike |
Opt Bid |
%Dnsd. Prot |
%If Unch. |
%If Asgnd. |
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| PRX | 24.17 (+0.19) | PRXBE | 07 FEB 25.0 (24) | 0.65 | 2.7 | 2.8 | 6.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
We only found one suitable generic drug covered calls stock options position for February (PRX) with a maximum potential return of 6.3% if the stock price is greater than the $25 strike price of call option PRXBE and in only 24 days.
The position is out-of-the-money with downside protection of 2.8%. Even if the stock price remains the same as at entry, the position will return 2.8% at stock option expiration. OTM covered calls positions require the stock price of the underlying to appreciate in order to realize the maximum potential return.
Competitors:
Competitors for PRX include: Mylan Laboratories Inc. (MYL), Teva Pharmaceutical Industries Ltd. (TEVA), and Watson Pharmaceuticals Inc. (WPI).
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[tags]blog, generic drug, MYL, Mylan Labs., PRX, Pharmaceutical Resources Inc., TEVA, Teva Pharma. Indus. Ltd., WPI, Watson Pharma. Inc., covered call investment strategy, investment strategy, iron condor, option income, poweroptions, selling naked puts, stock option trading, stock options[/tags]