Options Report

November 30, 2018

Covered Call Relative Risk Ranking LOW

CVS Health Corporation Diagonal Spread Relative Risk Ranking N/A
STARS® Ranking For Underlying Stock STRONG BUY HHHHH
Note: The Options Report is not a substitute for the underlying stock’s Stock Report which contains information about the underlying stock and basis for the STARS Ranking.
Stock Symbol: CVS Option Strategy Summary : The CVS January '19 covered call with a 77.50 strike price could potentially yield a 2.65% return if CVS stock stays
Stock Price (as of Nov. 30, 18): $80.00 above $77.50 a share at expiration 49 days from now. No reasonable diagonal spread trade was found for this stock. Either no LEAP options exist or
potential profitability did not fall into a reasonable range. The covered call has a 4 Key (Low Relative Risk) ranking and 5.63% downside protection.
12-Mo. Target Price (set Nov. 06, 18): $95.00 On November 6, 2018 CFRA set a $95 12-Month price target for CVS which is currently trading $15 below that target. By using this covered call
Annual Dividend Yield: 2.00 strategy potential returns may be higher than simply holding the stock if CVS stays below $82 through January 18, 2019. The covered call strategy
50-Day Moving Average: 76.70 offers limited protection if the stock drops in price but if the stock goes below $75.50 expect losses.
100-Day Moving Average: 73.91
200-Day Moving Average: 69.99
Option Strategies Risk Assessment
Strategy

Comparison ladder
Covered Call Diagonal Spread Based on range of Covered Call Risk Assessment
stock prices at expiration Our 4 Key (Low Relative Risk) covered call strategy risk assessment reflects the
volatility of CVS and CFRA's view of the company's prospects over the coming 12
Call Month Above $79.50 months. A 4 Key ranked strategy has low relative risk, which means there is a
Buy-Side

Stock Symbol CVS

Call Strike Price $0.00 Strategy shown not applicable possibility that the stock will be assigned on or before 1/18/2019 - expiration
Stock Price $80.00 day - and that the strategy will be closed at the profit level shown in the covered
Call Ask Price $0.00
Not Applicable call table. As with any stock or option strategy there is always risk of losing
money. If CVS heads downward for any reason, only $4.50 of that drop will be
Diagonal Spread (Min. Return) protected using this strategy. If CVS is selling for over $82.12 at expiration,
Sold Call Month Jan '19
Sell-Side

holding the stock without selling the call would have yielded a higher return. See
Sold Call Strike Price $77.50 elsewhere in this report for a further discussion of potential risks related to the
$4.50 Between $79.50 - $75.50
Current Sold Call Bid Price Covered Call Strategy.
Covered Call

Net Debit $75.50 $0.00 Diagonal Spread Risk Assessment

Downside Protection (%) 5.63 0.00 No reasonable diagonal spread trade found.
Below $75.50
In-The-Money (%) 3.13 0.00 No Covered Call Strategy
Break Even 75.50 0.00
Key Metrics

Assigned Return ($) 2.00 0.00

Assigned Return (%) 2.65 0.00
Not Applicable
Ann. Assigned Return (%) 19.73 0.00
Diagonal Spread (Max. Return)
Expiration Date January 18, 2019 January 18, 2019
Trade Duration (Days) 49 Assumes Long Call
Retains Time Value
Relative Risk Ranking 4 NONE

Option Strategies Potential Profit/Loss Comparison Chart. (See disclosures for charts on last page)
20 20

15 15

10
Potential Profit/Loss (Dollars)

10
Potential Profit/Loss (%)

5 5

0 0

-5 -5

-10 -10

-15 -15

65 70 75 80 85 90 95 100 65 70 75 80 85 90 95 100
CVS Health Corporation (CVS) Stock Price at Expiration CVS Health Corporation (CVS) Stock Price at Expiration
Option Strategies Discussion

CVS Health Corporation (NYSE: CVS) closed yesterday at $80. So far the stock has hit a 52-week low of $60.14 and 52-week high of $83.88. CVS has had a 5 STARS (out of 5) ranking since 10/11/2018. On
11/6/2018 CFRA equity analysts set a 12-month price target of $95 for the stock. CVS Caremark stock has been showing support around $79.07 and resistance in the $81.27 range. For a hedged play on this stock,
consider a Jan '19 covered call with a 77.50 sold call for a net debit in the $75.50 area. This covered call has a 49 day duration, and provides 5.63% downside protection and a 2.65% assigned return rate for a
19.73% annualized return rate (for comparison purposes only). This strategy has a 4 Key (out of 5) Low Relative Risk ranking and downside protection of 5.63%. CVS Caremark has a current annual dividend yield of
2%.

Please read the disclosures at the end of this report. This report is provided by CFRA and contains content provided by Fresh Brewed Media/O2 Media LLC.
Options Report
November 30, 2018

Glossary Diagonal Spread Max Return Expiration Month

This is the potential percent return for the position if the The month during which the expiration date occurs. Stock
100-Day Moving Average short-term option is ITM at expiration and the longer-term options typically expire on the third Friday of the month.
A 100-Day simple moving average is the average closing price option retains its time value. One may buy to close the call
before expiration, buy back the option and sell one in a farther Horizontal Spread
of the stock over the last 100 trading days. Moving averages An option strategy that involves the purchase of a
can be used to gauge the direction of price movement in a out month (called rolling the option), or buy stock to cover and
then sell another call against the farther out option. farther-term call or put option and the selling of an equal
stock. number of nearer-term options of the same type and strike
12-Month Target Price Diagonal Spread Risk Assessment price. Example: buying 1 XYZ May 60 call (far-term option)
The equity analyst's projection of the market price a stock will The diagonal spread risk assessment and Key ranking is a and selling 1 XYZ March 60 call.
command 12 months hence, based on a combination of proprietary indicator to help assess the relative risk of a
potential trade. All option trades generate a Key ranking from Intrinsic Value
intrinsic, relative, and private market valuation metrics.
1 Key (highest relative risk) to 5 Keys (lowest relative risk). The Option premium is made up of either time value, intrinsic
risk ranking uses a number of indicators such as volatility, value or both. The intrinsic value is based on how
200-Day Moving Average moving averages and underlying stock rankings. deep-in-the money the stock is priced. For a call, it is how far
A 200-Day simple moving average is the average closing price above the strike price the stock price is located.
of the stock over the last 200 trading days. Moving averages Diagonal Spread Risk Ranking
can be used to gauge the direction of price movement in a This proprietary risk ranking is similar to the covered call risk In-the-Money
ranking and rates Diagonal spread trades from 1 Key (Highest A call option is in-the money if the stock price is above the
stock.
relative risk) to 5 Keys (Lowest relative risk.) This ranking option strike price.
50-Day Moving Average system uses indicators including volatility, percent
The 50-Day moving average is the average closing price of
In-The-Money Percent (%)
out-of-the-money, and STARS ranking to assess the risk for a For a covered call this shows how far, as a percent of the
the stock over the last 50 trading days. Moving averages can trade. Diagonal spread trades will typically show a lower Key current stock price, the underlying stock price is related to
be used to gauge the direction of price movement in a stock. risk ranking (they are riskier) and higher potential return than the sold call strike price. This is calculated by dividing the
covered call trades on the same stock. in-the-money dollar amount by the current stock price.
52-Week High
This is the highest price that a stock has traded at during the
Diagonal Spread Key Metrics
last 52 weeks.
An option strategy involving the purchase of a longer-term The Key Metrics area of the report shows important
52-Week Low call or put option and the sale of an equal number of information about the strategy including the net debit,
This is the lowest price that a stock has traded at during the shorter-term options of the same type at a different strike downside protection percent and relative risk ranking.
last 52 weeks. price.
Long Call
Call Ask Price Buying a call on a stock results in a "long call" position. An
Annualized Assigned Return (%)
The price a seller offers to sell a call option. This is the most investor buys a call if they think the stock price will rise.
The process of taking a return and multiplying it by a factor to
an investor should pay for the bought option.
simulate the return on a yearly basis. The return is multiplied Net Debit
by 365 then divided by the number of days to expiration. This Call Month The amount paid when doing a spread transaction. It is a
return is always given for comparison purposes only. The month during which the call option expires. negative difference between the option(s) sold price(s) and
option(s) bought price(s).
Annual Dividend Yield Call Strike Price
A company's projected yearly dividend amount shown as a The price at which the owner of an option can purchase (call) Option Strategies Discussion
percentage of its stock price. or sell (put) the underlying stock. Used interchangeably with The Option Strategies Discussion shows several critical
striking price, strike, or exercise price. factors analysts consider and then shows the potential return
Assigned Return and Assigned Return (%) rates on each strategy.
The potential return from an option position, if the stock Covered Call Risk Ranking
price is in the exercisable range at expiration. For a covered A proprietary relative risk ranking for covered call strategies Option Strategy Summary
call, this potential return includes the premium from the that ranks covered call trades from 1 Key (Highest Relative This is the executive summary of the report that shows the
sold option and any profit/loss on the covering stock position Risk) to 5 Keys (Lowest Relative Risk.) This ranking system potential returns and costs of both the covered call and
and assumes the stock price is above the strike price at uses a number of technical and fundamental indicators diagonal spread strategies.
expiration. This calculation does not include margin and is including stock beta, implied volatility, assigned return
not annualized. percent, percent out-of-the-money, STARS rankings, and Out-of-the-Money
moving averages to assess the relative risk on each trade. A call option is out-of-the money if the stock price is below
Assignment its strike price.
Notification that an owner of an option has exercised his or Covered Call
her rights to buy or sell the underlying stock. The buyer of an An option strategy in which a call option is written (sold) Sell-Side
option exercises his right and the seller of the option is against an equivalent amount of long (owned or bought) Many option-related strategies have multiple transactions. In
assigned on the option. stock. Example: writing 10 ABC May 70 calls while owning a covered call, shares of stock are purchased and call
1,000 shares or more of ABC stock. options are sold simultaneously. The Sell-Side section shows
Bid/Ask Spread the month and strike price for the call option sold for this
This is the difference in price between an option's bid and ask Current Sold Call Bid Price strategy.
price. Options have wider bid-ask spreads than stocks do. The price a buyer is willing to pay a seller for a call option.
This is the least an investor will receive for the sold option. Sold Call Month
Break Even This is the expiration month of the sold call option.
The stock price at which any option strategy or combination Downside Protection
stock and option strategy has a zero loss and zero gain. Downside protection refers to the dollar amount a stock can Sold Call Strike Price
drop before the covered call or diagonal spread becomes a This is the strike price of the sold call. When an option is sold,
Buy-Side loss. the purchaser has the right (or option) to buy the stock at the
Many option-related trades have multiple transactions. In a strike price any time between the initial purchase and the
covered call, shares of stock are purchased and call options Downside Protection (%) date the option expires.
are sold simultaneously. The Buy-Side section indicates the This shows how far, as a percent of the current stock price,
stock or call option bought for this strategy. the underlying stock would need to drop before the covered Stock Resistance
call or diagonal spread becomes a loss. This is calculated by A term used in technical analysis to describe a price at
Diagonal Spread Assigned Return dividing downside protection by the current market price. which rising stock prices are expected to stop or meet
This is the potential percent return for the position if the short-
increased selling activity. This analysis is based on historic
term option is In-The-Money (ITM) at expiration and the Expiration Date
price behavior of the stock.
longer term option is exercised to cover the trade. The date on which an option, and the right to exercise it or
have it assigned, cease to exist. Stock Support
Diagonal Spread Minimum Return
If the stock expires above the short call, this is the potential Expiration Friday A term used in technical analysis to describe a price at
percent return for the position assuming both options are The last business day prior to the option's expiration date which falling stock prices are expected to stop or meet
exercised at expiration. during which purchases and sales of options can be made. increased buying activity. This analysis is based on previous
For equity options, this is generally the third Friday of the price behavior of the stock.
expiration month.

Please read the disclosures at the end of this report. This report is provided by CFRA and contains content provided by Fresh Brewed Media/O2 Media LLC.
Options Report
November 30, 2018
future performance or price appreciation or depreciation.
Glossary (Continued from Page 2) Information Pertaining to the Options Report
This material is not intended as an offer or solicitation for the
OPTIONS STRATEGIES: KEY RANKINGS : All options purchase or sale of any security or other financial
Strategy
strategies are based upon underlying stocks that have been instrument. A reference to a particular investment or
The strategy refers to the choice of options methods
assigned a 3, 4, or 5-STARS ranking by CFRA equity analysts. security is not a recommendation to buy, hold or sell such
deployed to seek to profit on a stock and may be selling a
Each hedged strategy shown is given a "Key" ranking as an investment or security, nor is it considered to be investment
covered call, selling a diagonal spread or holding the stock.
indicator of relative risk for the strategy. 1 Key is highest advice. This material does not take into account your
Time Value
relative risk, while 5 Keys denotes lowest relative risk. The Key particular investment objectives, financial situations or
Option premium is made up of either time value, intrinsic
rankings are determined based on numerous factors ranging needs, trade size, brokerage commissions and taxes and is
value or both. From its creation date to its expiration date, an
from the STARS ranking for the underlying stock to the not intended as a recommendation of particular securities,
option's time value decays away and any value left is intrinsic
volatility of the associated equity options. The Key Ranking for financial instruments or strategies to you. Securities,
value which rises or falls with the price of the stock. If XZY
each strategy is determined at the time the strategy is initially financial instruments or strategies mentioned herein may not be
stock is at $51.00 and the April 50 call is trading at 2.50, the
identified based on market prices, STARS rankings and suitable for all investors. CFRA and its affiliates are not
option has 1.00 (51.00-50.00) of intrinsic value and 1.50
statistics before the market opening of the date on this report. responsible for suitability. Any opinions expressed herein are
(2.50-1.00) of time value.
Strategies are ranked using a 1 to 5 ranking system as follows: given in good faith, are subject to change without notice, and are
Trade Duration (Days)
This is the number of days a trade is active. It is the total 1 Key -Highest Relative Risk only current as of the stated date of their issue. Prices, values, or
number of days from the initial opening transaction until income from any securities or investments mentioned in this
expiration day. 2 Key -Considerable Relative Risk report may fall against the interests of the investor and the
Volatility investor may get back less than the amount invested. Where an
This is a rating of the stock’s price volatility over the past year. 3 Key -Moderate Relative Risk investment is described as being likely to yield income, please
Volatility is the propensity of a security to swing up and down note that the amount of income that the investor will receive from
in price. 4 Key -Low Relative Risk such an investment may fluctuate. Where an investment or
security is denominated in a different currency to the investor’s
Disclosures 5 Key -Lowest Relative Risk currency of reference, changes in rates of exchange may have an
COMPARISON LADDER: The Comparison Ladder is adverse effect on the value, price or income of or from that
S&P GLOBAL™ is used under license. The owner of this designed as a tool to help evaluate which, if either, of the investment to the investor. The information contained in this
trademark is S&P Global Inc. or its affiliate, which are not strategies (Covered Call or Diagonal Spread) is more report does not constitute advice on the tax consequences of
affiliated with CFRA Research or the author of this content. attractive based on an assumed range of stock prices at making any particular investment decision. This material is not
This report is for informational purposes only. When using this expiration. intended for any specific investor and does not take into account
report, investors are advised to consult the accompanying INFORMATION ON CHARTS: Return data is based on one your particular investment objectives, financial situations or
glossary of investment terms. options contract and/or owning 100 shares of the underlying needs and is not intended as a recommendation of particular
stock. Return data excludes transaction costs, taxes and the securities, financial instruments or strategies to you. Before
The data and information shown in this report is intended effect of margin calls. The Potential Profit/Loss chart is based acting on any recommendation in this material, you should
for use by financial professionals and/or sophisticated on assumed price movements of the underlying stock and consider whether it is suitable for your particular circumstances
investors who should verify that all data, assumptions, and does not reflect all possible prices. Therefore, the potential and, if necessary, seek professional advice.
results are accurate before making any investment decision loss is not necessarily limited to the loss depicted in the chart. This document does not constitute an offer of services in
or recommendation. Before acting on any information in this jurisdictions where CFRA or its affiliates do not have the
document, an investor should consider whether the strategy is
Disclaimers and Warnings: necessary licenses.
suitable for their particular circumstances and, if necessary, RISKS OF USING EXCHANGE-TRADED OPTIONS : Certain information in this report is provided by S&P Global, Inc.
seek professional advice. Investing in options carries substantial risk. An investor may and/or its affiliates and subsidiaries (collectively “S&P Global”).
STARS® RANKINGS (ON UNDERLYING STOCK): lose the entire amount of the premium paid for an option. Such information is subject to the following disclaimers and
Option strategies do not protect against a continued decline notices: “Copyright © 2017, S&P Global Market Intelligence (and
STARS rankings are subject to change at any time. The STARS in the value of the underlying stock, and it is possible to lose its affiliates as applicable). All rights reserved. Nothing contained
Ranking system is defined as follows: the entire amount of money invested in the underlying stock. herein is investment advice and a reference to a particular
Prior to buying or selling options, a person should consult a investment or security, a credit rating or any observation
HHHHH 5-STARS (Strong Buy): Total return is expected to financial advisor and must receive a copy of Characteristics concerning a security or investment provided by S&P Global is not
outperform the total return of a relevant benchmark, by a wide and Risks of Standardized Options which is available at a recommendation to buy, sell or hold such investment or security
margin over the coming 12 months, with shares rising in price or make any other investment decisions. This may contain
http://www.cboe.com/resources/intro.aspx information obtained from third parties, including ratings from
on an absolute basis.
The content of this report and the opinions expressed herein credit ratings agencies. Reproduction and distribution of S&P
HHHHH 4-STARS (Buy): Total return is expected to are those of CFRA and IO based upon publicly-available Global’s information and third party content in any form is
outperform the total return of a relevant benchmark over the information that CFRA and IO believe to be reliable and the prohibited except with the prior written permission of S&P Global
coming 12 months, with shares rising in price on an absolute opinions are subject to change without notice. This analysis or the related third party, as applicable. Neither S&P Global nor its
basis. has not been submitted to, nor received approval from, the third party providers guarantee the accuracy, completeness,
United States Securities and Exchange Commission or any timeliness or availability of any information, including ratings,
HHHHH 3-STARS (Hold): Total return is expected to closely other regulatory body. While CFRA and IO exercised due care and are not responsible for any errors or omissions (negligent or
approximate the total return of a relevant benchmark over the in compiling this analysis, CFRA, IO AND ALL RELATED otherwise), regardless of the cause, or for the results obtained
coming 12 months, with shares generally rising in price on an ENTITIES SPECIFICALLY DISCLAIM ALL WARRANTIES, from the use of such information or content. S&P GLOBAL AND ITS
absolute basis. EXPRESS OR IMPLIED, to the full extent permitted by law, THIRD PARTY CONTENT PROVIDERS GIVE NO EXPRESS OR IMPLIED
regarding the accuracy, completeness, or usefulness of this WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY
HHHHH 2-STARS (Sell): Total return is expected to information and assumes no liability with respect to the WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A
underperform the total return of a relevant benchmark over consequences of relying on this information for investment PARTICULAR PURPOSE OR USE AND ALL S&P INFORMATION IS
the coming 12 months, and the share price not anticipated to or other purposes. No content (including ratings, PROVIDED ON AN AS-IS BASIS. S&P GLOBAL AND ITS THIRD PARTY
show a gain. credit-related analyses and data, valuations, model, software CONTENT PROVIDERS SHALL NOT BE LIABLE FOR ANY DIRECT,
or other application or output therefrom) or any part thereof INDIRECT, INCIDENTAL, EXEMPLARY, COMPENSATORY, PUNITIVE,
HHHHH 1-STARS (Strong Sell): Total return is expected to (Content) may be modified, reverse engineered, reproduced SPECIAL OR CONSEQUENTIAL DAMAGES, COSTS, EXPENSES,
underperform the total return of a relevant benchmark by a or distributed in any form by any means, or stored in a LEGAL FEES, OR LOSSES (INCLUDING LOST INCOME OR PROFITS
wide margin over the coming 12 months, with shares falling in database or retrieval system, without the prior written AND OPPORTUNITY COSTS OR LOSSES CAUSED BY NEGLIGENCE)
price on an absolute basis. permission of CFRA. The Content shall not be used for any IN CONNECTION WITH ANY USE OF THEIR INFORMATION OR
unlawful or unauthorized purposes. CFRA and any third-party CONTENT, INCLUDING RATINGS. Credit ratings are statements of
A reference to a particular investment or security by CFRA or providers, as well as their directors, officers, shareholders, opinions and are not statements of fact or recommendations to
one of its affiliates is not a recommendation to buy, sell, or employees or agents do not guarantee the accuracy, purchase, hold or sell securities. They do not address the
hold such investment or security, nor is it considered to be completeness, timeliness or availability of the Content. suitability of securities or the suitability of securities for
investment advice. Certain information presented herein is derived investment purposes, and should not be relied on as investment
This report is created by InvestorsObserver ("IO"), a subsidiary from the Stock Report for the underlying stock; however, not advice. This investment analysis was prepared using the
of Fresh Brewed Media/O2 Media LLC. (”FBM”). Accounting all information from the Stock Report is presented herein. following sources: Accounting Research & Analytics, LLC d/b/a
Research & Analytics, LLC d/b/a CFRA or its affiliates provides For key statistics, assessments and other information CFRA, One New York Plaza, 34th Floor, New York, NY 10004, S&P
this report to subscribers who provide this report to you. FBM pertaining to the underlying stock, you should consult the Global Market Intelligence, 55 Water St., New York, N.Y. 10041,
and IO have developed and are responsible for the strategies, applicable Stock Report. Investors are responsible for Fresh Brewed Media/O2 Media LLC, 413-A E. Main Street,
discussions, assessments and other analyses of the options conducting their own independent research and/or seeking Charlottesville, VA. 22902
presented in this report. professional advice before making any investment decision. Reports prepared using technology protetected by US Patent
Past stock, index, or option performance is no guarantee of Numbers 7,856,390 and 7,716,116

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