Best Stock on the Market

Call Spread on JAZZ on 9/24/2012

Jazz Pharmaceuticals is anything but free-form or improvisational in its development of drugs to treat neurological, oncology, and women's health conditions. The company's marketed treatments include Xyrem for narcolepsy, anxiety treatment Luvox CR, and chronic pain medicine Prialt. It also sells cancer drugs including Erwinaze for leukemia. Jazz Pharmaceuticals has license and supply agreements with Abbott Laboratories and Elan Pharmaceuticals for Luvox CR. The company's research and development pipeline includes a potential treatments for epileptic seizures, as well as next-generation versions of Xyrem. Jazz Pharmaceuticals merged with private drugmaker Azur Pharma to form Jazz Pharmaceuticals plc in 2012.


Stockwinners is bullish on this name for the following reasons:

  1. 1. Jazz Pharmaceuticals Plc (JAZZ) won a federal judge’s support in a patent dispute over its best-selling medicine Xyrem to treat narcolepsy. U.S. District Judge Esther Salas sided with Jazz on the interpretation of most disputed terms in eight patents in its suit against Roxane Laboratories Inc.

  2. Jazz's quarterly earnings gains have decelerated for five straight quarters, starting at 228% in Q1 of 2011 to 33% in Q2 of this year. But analysts' estimates for the current period's profit are running at a 40% rise. Sales growth, meanwhile, has been on the upswing in that period, starting at 45% and hitting 113% in Q1 and 101% in Q2.

Trade: Buy 1 Oct/Nov $55/$60 Call for less than $1.90

  • Buy 1 Oct $55 call for $4.70
  • Sell 1 Nov $60 call for $2.80

Breakeven & Profit/Loss analysis

  • Breakeven $56.90 at by Oct expiration
  • Profit up to 3.10 between $56.90 and $60 ,Max profit $3.10 above $60
  • Lose up to $1.90 between $56.60and $55, Max loss $1.90 below $55

The payoff table is presented below :

Trade

  • Buy 1 October $55.00 Call at $4.70
  • Sell 1 November $60.00 Call at $2.80
  • For a net debit of $1.90

Profit/Loss Analysis

  • Breakeven at $56.90
  • Maximum profit is $310.00 at strike of $60.00
  • Maximum loss is ($190.00) at strike of $55.00

Closing Summary

  • Sold 1 October $55.00 Call at $0.00
  • Bought 1 November $60.00 Call at $0.00

Position closed on 10/22/2012 at price of $0.00 with a -100.00% loss in 27 days.

Back to Portfolio