On Monday I wrote puts on GlaxoSmithKline plc (GSK)
music selection: “First Date” — Blink-182
GSK is a mega-cap pharmaceutical company. It yields almost 6%. Internal performance is quite strong with ROA of 20.8% and ROE of 149.50%. It trades for a reasonable multiple of 2.7 times sales. The future looks bright. The company has 258 new products in the development pipeline, leading the space. Almost 40 of these drugs are in advanced clinical trials and it can be expected the company will bring many new products to market by 2020.
I was able to sell GSK151120P00043000 for 1.05. The trade will be open for 19 days and yields an impressive 46.91% annualized. The market was underwhelmed by the latest press release regarding progress on bringing new drugs to market and shares fell some and brought the put into the money. I will be happy to own at 43 (less a dollar-five!) as yield will be 5.51%. I would write covered calls around 5-7% out of the money for bonus yield in the 5% range while I wait for upside appreciation. Total yield would be around 10% with an eventual capital gain kicker.
On Monday I have an update of the Third Point Re quarter for you.
Devour your prey raptors!