Bristol Myers (BMY) 10/28/09 PriceWatch Alert Down To $20.74 Break Even

Posted: Wednesday, October 28, 2009 8:28 AM EDT
By: Market Intelligence Center Staff

Bristol Myers (NYSE: BMY) closed yesterday at $22.12. So far the stock has hit a 52-week low of $17.23 and 52-week high of $23.98. Bristol Myers stock has been showing support around 21.74 and resistance in the 22.50 range. Technical indicators for the stock are Bearish and S&P gives BMY a very positive 5 STAR (out of 5) strong buy rating. BMY appears on the Investors Observer Analysts Favorites list. For a hedged play on this stock, look at a Mar '10 22 covered call (BMY CH) for a net debit in the $20.74 area. That is also the break even stock price for this trade. This covered call has a 143 day duration, provides 6.24% downside protection and a 6.08% assigned return rate for a 15.51% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the BMY Jan '11 17.50 Call (VBM AT) and selling the Mar '10 22 call (BMY CH) for a $3.77 debit. The trade has a 143 day life and would provide 3.84% downside protection and a 19.36% assigned return rate for a 49.00% annualized return rate (for comparison purposes only). Bristol Myers has a current annual dividend yield of 5.58%. [WBA-Seven Summits Research]