Abbott Labs (ABT) gains on stent study results

Posted Mar 30th 2009 12:20PM by Brent Archer
Filed under: Good news, Abbott Laboratories (ABT), Boston Scientific (BSX), Options, Technical Analysis

Abbott Laboratories (NYSE: ABT - option chain) shares are higher today despite the surrounding market meltdown after a study released over the weekend showed the company's Xience stent showed significant safety advantages over competitor Boston Scientific's (NYSE: BSX) Taxus stent. 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 ABT.

ABT opened this morning at $46.69. So far today the stock has hit a low of $46.65 and a high of $47.90. As of 11:35, ABT is trading at $47.73, up $1.13 (2.4%). The chart for ABT looks bullish and S&P gives ABT a positive 5 STARS (out of 5) strong buy ranking.

For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $42.50 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 three weeks as long as ABT is above $42.50 at April expiration. Abbott would have to fall by more than 10% before we would start to lose money.

ABT hasn't been below $44 at all in the past year and has shown support around $46 recently.

Brent Archer is an options analyst and writer at Investors Observer. At publication time, Brent controls bullish hedged positions in ABT.

Tags: abbott laboratories, AbbottLaboratories, ABT, boston scientific, BostonScientific, BSX, inthenews, investors observer, InvestorsObserver, options, stent