AstraZeneca (NYSE: AZN - option chain) shares are rising today after the company said its experimental heart pill, Brilinta, was more effective at preventing heart attacks and strokes in a large clinical trial than Plavix, a drug made by competitors Sanofi-Aventis (NYSE: SNY) and Bristol-Myers Squibb (NYSE: BMY). 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 AZN.AZN opened this morning at $38.16. So far today the stock has hit a low of $37.83 and at 11:25 is trading at the days high of $38.21, up 2.07 (5.7%). The chart for AZN looks neutral and S&P gives AZN a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $30 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 a 13.6% return in just five months as long as AZN is above $30 at October expiration. AstraZeneca would have to fall by more than 21% before we would start to lose money.
AZN has not been below 29.96 at all int he past year and has shown support around $35 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 AZN or SNY. He does control bullish hedged trades on BMY.
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Reader Comments (Page 1 of 1)
6-04-2009 @ 5:36AM
Elite Health said...
It’s like a really surprising blog for any one who is suffering from heart disease. But the rate at which damage occurs to the heart cells are far beyond their recovery cycle. So, though it might not be that helpful in recovery, but still for youngsters, it can be like a boon. Isn’t it natural for us to believe we are healthy and not suffering from any disease? I had a similar thought process until my physician asked me to get a heart scan done after he found that my basic cardiograms were not perfect. I discovered that there were calcium deposits in my coronary arteries and I was at a serious risk of a heart attack. I was shocked and went ahead with the Cardiologist's suggestion of an advanced diagnostic scan. Though it’s always tough to undergo such experiences, I was not at any kind of discomfort at the Elitehealth.com advanced heart scan facility. I am not an expert in medical appliance and machines but could feel that the equipment was world-class and I was in safe hands. That feeling is really very important for me and that’s how it actually went on. The facilities for Full Body Scan were as good as they can get.
6-19-2009 @ 2:55AM
David said...
angioplasty would be better