http://finance.yahoo.com/news/bristol-myers-bmy-stock-beat-154103073.html http://finance.yahoo.com/news/bristol-myers-squibb-reveals-regulatory-115822588.html http://finance.yahoo.com/news/bristol-myers-squibb-says-fda-121446144.html http://finance.yahoo.com/chart/BMY Trade: With BMY at 75.56 Jan '18 55/50 bull put spread for a net credit of $65 Yield = 65/435 = 14.9% in 534 days or 10.2% annualized Prob = 90% Expectation = .9(65) - .05(435) - .05(218) = 58.5 - 21.8 - 10.9 = 25.8 Price........... Profit / Loss.......... ROM % 37.50............... (435.00)........... -85.10% 48.43............... (435.00)........... -85.10% 50.00............... (435.00)........... -85.10% 54.35.................... 0.00............... 0.00% 55.00.................. 65.00.............. 14.90% 59.93.................. 65.00.............. 14.90% 71.44.................. 65.00.............. 14.90% 82.94.................. 65.00.............. 14.90% 94.45.................. 65.00.............. 14.90% BMY is my favorite company in the world. I used to be a contractor for them and they essentially put me in business and kept me there until I sold my company. While all the people I used to work with have retired, I think good companies have good DNA and quality persists through the years.
Bristol has been a gem in my portfolio over the past few years. I've been long it since Aug. of 2012. I'm not much of one to go for leap options, but I like the idea of selling a strangle on it as an earnings play -- with the call side covered by the shares I already own, and with the put side, willing to pick up more shares at a lower price. Hmmm...
filled at $64. Here's something that often happens to me when I use IB. I put in a limit order to give me $65 but got filled at $64. It's alright...it won't kill me...but this doesn't happen with other brokers. What do they have...a 'close enough' algorithm??
http://finance.yahoo.com/news/bristol-myers-drug-fails-lung-132956899.html Bristol-Myers drug fails lung cancer study, shares plunge We are holding a 55/50 bull put spread. The last price I have on BMY is 62.55. http://stockcharts.com/h-sc/ui?s=BMY Obviously this is a catastrophic occurrence for BMY. If the price stays above the 55 we will be OK and still make our profit. If price further decays we could have a large loss. Right now I could get out with pretty minimal loss. I have to decide.
I think traders overreacted. BMY is a quality company and they will be a good long term investment. I have been eying this stock for a while and I am actually considering long calls using this as an opportunity to get in at a reasonable price, just waiting for the IV to settle down some.
May I suggest you try a risk reversal strategy... Sell a slightly OTM put to finance the purchase of an ITM call.
I think you are right. Traders did overreact...including me. Buying calls here is probably not a bad idea. As for me...I stay away from stocks that have such precipitous price spikes. Besides, I feel the market as a whole is overextended and I don't like long positions right now.
Yes, maybe this is the "be fearful" time. I am fearful too as this reminded me of the dot.com days. However right now the picking is good and it is very hard to think of getting out. Regards,