Buy Health-Care Options Before Jan. 5 Conference, Goldman Says

Wednesday, 28 Dec 2011 03:57 PM


Dec. 28 (Bloomberg) -- Investors should buy options on Merck & Co., Medtronic Inc., Humana Inc. and other health-care companies because their presentations at a Jan. 5 conference may increase volatility, Goldman Sachs Group Inc. strategists said.

Katherine Fogertey and John Marshall recommended buying January options strangles, a strategy that involves purchasing a put and call with the same maturity and strike price, to profit from bigger stock swings by eight health-care companies set to appear at the Goldman Sachs Healthcare CEO conference. Next month’s contracts are attractive because they aren’t pricing in bigger moves, the strategists wrote in a note today.

“Buying January options in health-care stocks ahead of this event is attractive,” the New York-based strategists wrote. “The market is not expecting material stock moving catalysts in the coming month.”

Investors can pay 3.3 percent on average for January options that are about 2 percent above and below the stock prices for the eight companies, the strategists wrote. The trade starts to profit if the shares rise 4.9 percent on average or fall 5.6 percent by expiration on Jan. 20, they said.

Goldman recommended the $37-$38 strangles for both Merck, the second-biggest U.S. drugmaker, and Medtronic, the world’s biggest maker of heart-rhythm devices. They cited the $87.50-$90 straddle on Humana, the second-largest U.S. Medicare managed- care provider.

The strategists also recommended strangles on Watson Pharmaceuticals, a Parsippany, New Jersey-based generic-drug maker, because regulatory approval of Prochieve, a drug that helps reduce risk of premature birth, and sales of generic Lipitor, may boost the company’s 2012 outlook. Bristol-Myers Squibb Co., Biogen Idec Inc., Celgene Corp. and Allergan Inc. also are attractive strangles, they said.

--With assistance from Roger Neill in London. Editors: Joanna Ossinger, Michael P. Regan

To contact the reporters on this story: Ksenia Galouchko in New York at kgalouchko1@bloomberg.net; Jeff Kearns in New York at jkearns3@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

© Copyright 2015 Bloomberg News. All rights reserved.

Around the Web
Join the Newsmax Community
Please review Community Guidelines before posting a comment.
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
Zip Code:
Privacy: We never share your email.
Hot Topics
Follow Newsmax
Like us
on Facebook
Follow us
on Twitter
Add us
on Google Plus
Around the Web
Top Stories
You May Also Like

Mali's Islamists Withdraw Cease-Fire Pledge

Friday, 04 Jan 2013 13:06 PM

Tens of thousands of Fatah supporters rallied in the Hamas stronghold of Gaza on Friday for the first time since they we . . .

Fmr. CIA Director Hayden: Iran Nuclear Crisis Gets 'Scarier'

Tuesday, 17 Jul 2012 18:11 PM

 . . .

Join Fmr. CIA Director for Special Iran Briefing, Assess the Danger

Friday, 13 Jul 2012 12:27 PM

 . . .

Most Commented

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

America's News Page
©  Newsmax Media, Inc.
All Rights Reserved