Bristol-Myers Squibb Stock (BMY) – Using Leap Options To Rescue Deep In The Money Naked Puts

Stocks are among the riskiest of assets. They can be incredibly rewarding and can also lead to stunning losses. This is why the selection of stocks to invest in is the number one key aspect to successful investing.

However every stock will inevitably run into trouble and see declines at various times in its history. There are hundreds of factors that can cause a stock to fall including changed in management, change in packaging, change in consumer or corporate demand, currency swings, dividend changes and cuts as well as failed products, to mention just a few.

The Reasons For Bristol-Myers Squibb Stock Collapse

It was a failed product trial that collapsed Bristol-Myers Squibb Stock on August 4. The failed trial of their drug Opdivo, which many had hoped would replace or improve present chemotherapy techniques, let to a sharp decline in the stock. Downgrades of the stock followed and the stock which originally collapsed to $63.28 on August 5, on Tuesday Aug 30 reached $57.24. On Friday Sep 9 it fell to $55.66 near the 52 week low of $55.11.

Bristol-Myers Squibb Stock (BMY) – Anatomy Of A Collapse

The collapse of BMY Stock happened overnight on August 4 to 5 on the news of their failed trial of the cancer treatment drug Opdivo. The initial drop took the stock from a close on August 4 of $75.32 to a close of $63.28 on August 5. This was an initial drop of $12.04 or 16%. There was no way for investors to escape the initial collapse of Bristol-Myers Squibb Stock on August 5.

At the outset of the drop investors bought into the drop as can be seen in the Accumulation-Distribution Indicator which shows buyers stepped into the drop and kept buying.

However as the drop deepened and broke through the $60 support level, the buyers left and sellers have taken charge. The Accumulation-Distribution Indicator shows that sellers are pummeling the stock further. On Friday Sept 9 it closed at $55.66 for a loss of $19.66 and a drop of 26% since August 4. The stock is in bear country now and at risk of falling further unless it can hold the $55 level which is light support only.

Bristol-Myers Squibb Stock (BMY) Collapse in August 2016

Bristol-Myers Squibb Stock (BMY) Collapse in August 2016

Caught In The BMY Stock Downturn – Turn To The Leaps

Sometimes when a stock collapses, such as BMY Stock has done, investors both stock owners and those who shorted put options are caught deep in the money with losses. They struggle with how to handle the loss of value in their trade and often many will take losses to get out of a stock collapse.

If the loss is small, getting out is almost always the best choice to make. However when a stock collapses quickly, there is rarely enough time to sell to get out with just a small loss.

In the case of Bristol-Myers Squibb Stock the initial collapse was quick and painful. There was no real chance to get out without incurring large losses. When that happens I know that often the most flexible rescue and repair strategies can be done through using the Leap Options that are available with most large cap stocks.

This rescue and repair strategy article for Bristol-Myers Squibb Stock can be applied to any large cap stock that has leap options available. This is a lengthy article at 3300 words and requires 11 pages if printed……….the rest of this strategy article is for FullyInformed Members.

FullyInformed Members can read this rescue and repair strategy article directly through this link or they can sign in to the full site here. Non-members can join here or read about the benefits of a membership.

Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.


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