Geron (NASDAQ: GERN - option chain) shares have shot more than 50% higher today after the FDA granted the company clearance to begin trials of a human embryonic stem cell-based therapy for people with spinal chord injuries. This monumental step officially is in no part President Obama's doing, but he has made his stance clear on the use of stem cells, and included a line in his inauguration speech that mentioned that "We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost." 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 GERN.GERN opened this morning at $6.48. So far today the stock has hit a low of $6.19 and a high of $8.38. As of 12:20, GERN is trading at $7.93, up $2.72 (52.2%). The chart for GERN looks bullish.
For a bullish hedged play on this stock, I would consider a March bull-put credit spread below the $5 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 11.1% return in just two months as long as GERN is above $5 at March expiration. Geron would have to fall by more than 43% before we would start to lose money. Learn more about this type of trade here.
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 GERN. He does own STEM.
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Reader Comments (Page 1 of 1)
1-25-2009 @ 9:26PM
taimie said...
Please Sign this ESC Funding Petition
Please sign this petition to release funding for ESC Research. Thank you
http://www.thepetitionsite.com/takeaction/756174123?z00m=19260234
1-27-2009 @ 12:26AM
chris said...
Here is a new Stem Cell company you guys will LOVE! PROT
www.proteonomix.com