Pfizer (NYSE: PFE - option chain) shares are rising today after the company gave an update on mid-stage studies of its experimental rheumatoid arthritis drug. A Phase Two study shows PFE's oral JAK-3 inhibitor "demonstrates statistically significant response for patients with rheumatoid arthritis." PFE is currently enrolling patients for a phase 3 study of the treatment. 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 PFE.PFE opened this morning at $14.09. So far today the stock has hit a low of $14.05 and a high of $14.65. As of 11:45, PFE is trading at $14.60 up 55 cents (3.9%). The chart for PFE looks neutral and S&P gives PFE a neutral 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $12 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 7.1% return in just three months as long as PFE is above $12 at September expiration. Pfizer would have to fall by more than 17% before we would start to lose money. Learn more about this type of trade here.
PFE has not been below $12 since March and has shown support around $13 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 PFE.
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