Using put options to protect your drug holdings. That's not the elevator pitch for a 'Wolf of Wall Street' sequel—it's the prudent strategy one options trader employed in huge size to hedge against potential downside in Bristol-Myers.
Shares of Bristol-Myers Squibb soared on Thursday, as investors cheered news that the company reported positive trial data for its lung cancer drug nivolumab. Of patients with advanced lung cancer who received the drug, only 59 percent were dead a year later. This may sound incredibly grim, but it is actually positive news given that the survival rate for patients in the study had ranged only from 5.5 percent to 18 percent, according to the company.
As a result of the announcement, shares of the drug company rose 9 percent.
However, the biggest options trade was actually a bearish one. One firm bought 7,500 November 55-puts for 49 cents each—a trade that will make money only if the stock is below $54.51 at November expiration, or 7.5 percent below Thursday's closing price.