Bristol-Myers Squibb (NYSE: BMY - option chain) shares are headed higher today after the company said its fourth-quarter profit came in at $1.24 billion, or 63 cents per share, on revenue of $5.25 billion. BMY's adjusted profit of 46 cents per share easily beat analysts' projections of 41 cents per share. 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 BMY.
BMY opened this morning at $22.92. So far today the stock has hit a low of $22.72 and a high of $23.44. As of 12:05, BMY is trading at $23.39, up 1.14 (5.1%). The chart for BMY looks bullish and S&P gives BMY a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a June bull-put credit spread below the $17.50 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 11.1% return in just five months as long as BMY is above $17.50 at April expiration. Bristol-Myers would have to fall by more than 25% before we would start to lose money. Learn more about this type of trade here.
BMY hasn't been below $17.50 since October and has shown support around $21.50 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 controls bullish hedged positions in BMY.
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