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Celgene (CELG - option chain) shares are rising today after a late-stage study of its blood cancer drug Revlimid was found to be so effective that the study was stopped early. 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 CELG.CELG opened this morning at $54.36. So far today the stock has hit a low of $54.02 and a high of $56.16. As of 12:15, CELG is trading at $55.81 up @5.19 (10.3%). The chart for CELG looks bullish and S&P gives CELG 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 $45 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 four months as long as CELG is above $45 at April expiration. Celgene would have to fall by more than 19% before we would start to lose money. Learn more about this type of trade here.
CELG has not been below $45 since June and has shown support around $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 neither owns nor controls positions in CELG.
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