Wyeth's (WYE) PREMARIN gets FDA approval

Wyeth (NYSE: WYE - option chain) shares have moved higher today after the FDA approved the usage of the company's PREMARIN to treat moderate to severe postmenopausal dyspareunia, which is just a clinical way of saying painful sexual intercourse. Helping treat that sounds like a good thing to me. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on WYE.

WYE opened this morning at $32.68. So far today the stock has hit a low of $32.68 and a high of $34.29. As of 12:45, WYE is trading at $33.70, up $1.26 (3.9%). The chart for WYE looks neutral and S&P gives WYE a 3 STARS (out of 5) hold ranking.

For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $27.50 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 an 8.7% return in just five weeks as long as WYE is above $27.50 at December expiration. Wyeth would have to fall by more than 18% before we would start to lose money. Learn more about this type of trade here.

WYE hasn't been below $28 at all in the past year and has shown support around $30 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 WYE.