http://finance.yahoo.com/news/merck-beats-2q-profit-forecasts-105330501.html http://finance.yahoo.com/chart/MRK http://www.msn.com/en-us/money/stockdetails/financials/fi-126.1.MRK.NYS http://finance.yahoo.com/m/a2d41c14...a0baac5/ss_merck-results-underscore-need.html http://finance.yahoo.com/news/merck-mrk-updates-outlook-following-141402777.html Trade: with MRK at 58.66 Jan '17 40/45 bull call spread for a net debit of $420 Yield = 80/420 = 19% in 175 days or 39.7% annualized. (Since this is a debit spread I should also include the cost of investing $420 for 175 days...but I won't since my account has idle money and interest rates are so low) Prob = 98% Expectation = .98(80) - .01(420) - .01(210)= 78.4 - 4.2 - 2.1 = 71.9 Price...... Profit / Loss...... ROI % 30.00........... (420.00)...... -100.00% 35.00........... (420.00)....... -100.00% 40.00........... (420.00)....... -100.00% 44.20................ 0.00............. 0.00% 45.00.............. 80.00............ 19.05% 50.00.............. 80.00............ 19.05% 55.00.............. 80.00............ 19.05% 60.00.............. 80.00............ 19.05% 70.00.............. 80.00............ 19.05% https://en.wikipedia.org/wiki/Merck_&_Co.
Pharma and Biotech have had quite the run recently. Time to think "short". At least in the short-term (1-3 months).
Really? http://finance.yahoo.com/chart/xph Actually the pharmaceutical ETF is at a trough and looks like it might be bottoming (2 year graph). Of course you can play lots of games with graphs and come to a variety of conclusions. It depends on what 'recently' means. It's called market timing and usually isn't very productive. I realize MRK is up a little from where it was 'recently' but looking at a 2 year graph the trade is below support. It wouldn't change my mind either way. I base the trade on MRK's immediate prospects from a fundamental perspective rather than a market timing perspective, and have left enough room (I hope) for market gyrations. Note that MRK is a Zack's hold, while BMY,JNJ and LLY are rated buy. So Zack's thinks it's big pharma buy time. (Zack's has been wrong before) We'll know who's future predictor is 'right' in Jan.