BMY

[ironchef]

May I suggest you try a risk reversal strategy... Sell a slightly OTM put to finance the purchase of an ITM call.

Thanks for the suggestion, let me take a look.

 

[ironchef]

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.

I do have a question:

You are probably correct, as a whole the market is overextended and likely will correct in time. If I decide to go long on BMY options (a bull spread) I have to pick strikes and expiration. I am thinking one ITM, one OTM and months instead of days or weeks. Any opinion?

Thanks.

 

[ironchef]

With BMY @$60.4 today
Jan '18 55/50 Put bull spread with a credit of $1.95
Yield=$195/305 yield 63.9% in 530 days or 44% annualized.
Probability?
Expectation?

 

[oldnemesis]

BMY is down another couple of points today. I would hold off any trade until the stock stabilizes a little better. While we are still above my original spread I am not sorry I bailed. I will look to go bullish again but not just yet.

BTW my display shows that SEC uptick rule has been triggered for BMY. Not something I recall having seen on BMY before. Prob a good 'blood in the streets' signal with regard to going long. But not yet for me.

http://stockcharts.com/h-sc/ui?s=bmy

http://www.investopedia.com/terms/u/uptickrule.asp

 

[ironchef]

BMY is down another couple of points today. I would hold off any trade until the stock stabilizes a little better. While we are still above my original spread I am not sorry I bailed. I will look to go bullish again but not just yet.

BTW my display shows that SEC uptick rule has been triggered for BMY. Not something I recall having seen on BMY before. Prob a good 'blood in the streets' signal with regard to going long. But not yet for me.

http://stockcharts.com/h-sc/ui?s=bmy

http://www.investopedia.com/terms/u/uptickrule.asp

Thanks.

 

[oldnemesis]

http://realmoney.thestreet.com/arti...istol-myers?puc=yahoo&cm_ven=YAHOO&yptr=yahoo

http://finance.yahoo.com/news/bernstein-says-mercks-lung-cancer-154942679.html

http://finance.yahoo.com/news/argus-bristol-myers-selloff-overdone-154240921.html

http://finance.yahoo.com/news/berenberg-downgrades-bristol-myers-squibb-121604928.html

http://www.fool.com/investing/2016/...utm_medium=feed&utm_source=yahoo-2&yptr=yahoo

http://stockcharts.com/h-sc/ui?s=bmy

I still don't like how BMY is looking.

 

[ironchef]

I decided to dive a little deeper into the failed clinical trial to understand what was happening. I think from a fundamental point of view, Wall Street overreacted. The two questions I have:

1. From a Wall Street perspective, I think you are right, BMY does not look good in the short term I think investors who did not yet bail are waiting for a chance to get out and will put a lot of pressure on BMY's price. So, for a trader, he should not go long at this point?

2. Assuming the normal uptake of Opdivo without the expanded lung cancer treatment, what will be its revenue and profit contributions to BMY going forward. My "back of the envelop" calculation said that at the current price, BMY is undervalued. So for a long term investor it is OK to go long now or should he waits?

 

[oldnemesis]

Of course somewhere in here BMY will change from a falling knife to a buying opportunity. The question is when.

Just because you are a longer term investor is no reason to throw money away.

My trading history suggests that I will miss the inflection point as I am usually too conservative about such things.
BMY is still a good company BUT this failure bothers me a lot. They should have known better... that they didn't and/or were pretty careless about this study outcome makes me worry about how well they are managing their drug portfolio in general.