United Therapeutics (NASDAQ: UTHR - option chain) stock is falling today after the company announced it expects a probable delay in receiving FDA approval for Tyvaso, its inhaled drug to treat pulmonary hypertension. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on UTHR.This morning, UTHR opened at $59.90. So far today the stock has hit a low of $59.35 and a high of $62.34. As of 11:40, UTHR is trading at $61.08, down $5.20 (-7.9%). The chart for UTHR looks bearish.
For a bearish hedged play on this stock, I would consider a May bear-call credit spread above the $75 range. A bear-call credit spread is an options position that combines the purchase and sale of call 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 5.3% return in two months as long as UTHR is below $75 at May expiration. UTHR would have to rise by more than 23% before we would start to lose money.
UTHR hasn't been above $75 since November and shown resistance around $74 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in UTHR.
UTHR hasn't been above $75 since November and shown resistance around $74 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: At publication time, Brent neither owns nor controls positions in UTHR.
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