Pharmboy, one of Philstockworld.com’s contributing authors who follows the bio-tech industries, had a nice little trade idea for Bristol Myers Squibb (BMY) in the June 19, 2011 issue of Stock World Weekly.
We have a conservative trade idea from Pharmboy this week. He writes, “In these uncertain times, we need to go back to the basics for generating income by playing the biggest and the best pharma companies out there. Merck was one of the first picks we had in the debut of Stock World Weekly, and that buy/write trade is doing very well. The next is Bristol Myers Squibb (BMY). BMY has a robust pipeline one can read about here, and I like playing BMY conservatively by buying 100 shares (currently at $27.52) and selling a January 2013 $25 call and $27.50 put for $7.70 or better. That is a $19.80 basis if called away (if BMY is trading above $25 in January 2013), or $23.65 if BNY is put to you, which is about 14% off the current price. And don’t forget about the 4.8% dividend yield.”
- On June 20: Buy 100 shares of BMY for $27.52
- Sell Jan 2013 $25 call and sell Jan 2013 $27.50 put for a total of $7.70 or more.
- On June 28, BMY closed at $28.54 ($1.02 gain)
- Jan 2013 $25 call is at $4.40
- Jan 2013 $27.50 put is at $3.30
- Total to buy back options is $7.70
Total gain is $1.02, or 3.7%
So far, this is a gain of 3.7%
This trade is still open.