You may recall that I made *$710.00 selling Celgene Corp (CELG) Puts earlier this year – but had I simply bought 500 shares instead of selling Puts – I could have sold them for a $6,500.00+ profit! Why, because Bristol-Myers made an offer to acquire Celgene for $74 billion.
Fast forward to Today, and Bristol-Myers stock has taken a beating – many analysts felt they overpaid for Celgene, and even questioned if the deal would ever be approved. The stock is now trading at a significant discount to their Morningstar Fair Value of $65.00 per share.
Strange for me to be doing anything when the market is so overbought – but I like the story – and I think the Celgene deal will be approved, so here is the trade:
- Sold: Ten (10) May 17, 2019 Puts
- Strike Price: $44.00
- *Premium Collected: $760.00
If I am forced to buy the 1000 shares, my entry price will be approx. $43.24 per share – almost a 33% discount to Bristol-Myers Fair Value of $65.00 per share – providing a comfortable Margin of Safety. Bristol-Myers pays a 3.56% dividend – so it is a perfect candidate for my portfolio.
- Some Background: Bristol-Myers says shareholders vote to approve Celgene takeover
*Excludes transaction costs.
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