Sanofi-Aventis (NYSE: SNY - option chain) shares are soaring higher today after the company announced that its CEO Gerard Le Fur will be replaced by Chris Viehbacher, head of GlaxoSmithKline's (NYSE: GSK) North American pharmaceutical operations. If you think that the stock won't fall by too much in the coming months as the CEO gets a honeymoon period, then now could be a good time to look at a bullish hedged trade on SNY.SNY opened this morning at $35.59. So far today the stock has hit a low of $35.28 and a high of $35.84. As of 11:55, SNY is trading at $35.52, up $1.99 (5.9%). The chart for SNY looks bullish and S&P gives SNY a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $32.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 19.0% return in just three and a half months as long as SNY is above $32.50 at December expiration. Sanofi would have to fall by more than 8% before we would start to lose money. Learn more about this type of trade here.
SNY hasn't been below $32 at all in the past year and has shown support around $32.75 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in SNY or GSK.
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