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Bristol-Myers Squibb (BMY - option chain) shares are rising today after the release of a study which shows that an experimental blood-thinning drug co-produced by BMY and Pfizer (PFE) cut the rate of strokes among people with abnormal heartbeats by more than 50% versus aspirin. 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 BMY.BMY opened this morning at $26.11. So far today the stock has hit a low of $26.00 and a high of $26.34. As of 12:25, BMY is trading at $26.20 up 0.35 (1.3%). The chart for BMY looks bullish and S&P gives BMY a positive 4 STARS (out of 5) buy ranking.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $22 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 9.1% return in three and a half months as long as BMY is above $22 at December expiration. Bristol-Myers would have to fall by more than 16% before we would start to lose money. Learn more about this type of trade here.
BMY has not been below $22 since November and has shown support around $25.50 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 controls bullished hedged positions in BMY. He does not own nor control positions in PFE.
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