Thursday, June 25, 2009

Update Transaction - Bristol Myers Squibb (BMY)

Bristol-Myers Squibb has continued to oscillate between $19 and $21 since I purchased it in April. I have kept this position because as I mentioned in my asset allocation post, it is very important to make sure you are diversified in your portfolio. You cant always chase stocks that have the highest returns, because they are often in the same sector and can be very risky. BMY adds a low risk, high dividend position to the portfolio.

In the past few days there has been a very large run-up in the price of BMY, as a result of a shift in the market towards healthcare stocks. Unfortunately, the July premiums for BMY are not very good, and it will pay a dividend in early July, so I do not want it called away before then. As such, I sold an august call with a strike more than 5% above the current price. My new plan for BMY is to sell 2 month out calls, unless there is some event which boosts current month premiums. The new profit/loss info is below:

4/6/2009 -- Bought 100 BMY @ 20.48
4/6/2009 -- Sold To Open 1 BMY April $21 Call @ .34
4/17/2009 -- Covered Call Expired
4/20/2009 -- Sold To Open 1 BMY May $21 Call @ .65
4/29/2009 -- Bought To Close 1 BMY May $21 Call @ .11
5/12/2009 -- Sold To Open 1 BMY June $21 Call @ .55
5/27/2009 -- Bought To Close 1 BMY June $21 Call @ .18
6/25/2009 -- Sold To Open 1 BMY August $22 Call @ .35


The important purchase metrics are below for insight into possible profit and loss (these all include commissions):
Stock Purchase Cost: $2048.00


Downside Coverage (from current price of $20.89): 9.6%
Possible Max Upside: 15.49%

Annualized Max Upside: 40.97%

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