Bristol-Myers Squibb (NYSE:BMY) is engaged in the discovery, development, licensing, manufacturing, marketing, distribution and sale of pharmaceuticals and other healthcare-related products. The company has business segments for global pharmaceutical and international consumer medicines, infant formula and children's nutritionals, and medical imaging. The company's mission is to extend and enhance human life by providing the highest-quality pharmaceuticals and health care products.
Drug stocks have been among the few bullish issues in recent sessions and Friday, shares of BMY vaulted to a new 52-week high on robust trading volume. The primary catalyst for the move was a favorable court decision for Eli Lilly (NYSE:LLY), which is currently involved in a high-stakes patent battle over the market exclusivity of one of its best-selling drugs. The judgment prevents generic drugmakers from producing a cheaper version of the product and the precedent bodes well for Bristol-Myers Squibb and partner Sanofi-Aventis (NYSE:SNY), both of whom are facing a looming patent battle over their popular blood-thinner Plavix.
The downside potential for BMY in the coming months appears to be rather small and traders who wouldn't mind owning the stock at a basis near $24.50 should consider this position. We recommend placing the order for a higher credit ($0.45-$0.50 per contract) initially, to take advantage of any near-term consolidation in the underlying issue. This "Bonus Play" will not be listed in the OW portfolio.
Fundamentals Chart Earnings Dates Analyst Ratings
Suggested (Bullish) Option Position:
Sell Put MAY 25.00 BMY-QE
Target Price = $0.45 Open Interest = 6473
Potential Profit (5 contracts @ $0.45) = $225
Initial Margin (5 contracts) = $4,940
Return on Investment (max) = 4.1%
Cost Basis in Stock = $24.55
Days to Expiration = 34