Bearish Bet on Pharma Stock Doubled Investors' Money

There were signs of chart resistance at the time of our BMY put recommendation

Digital Content Manager
Sep 18, 2023 at 2:32 PM
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Subscribers to Schaeffer's Leverage Trader service more than doubled their investment with our Bristol-Myers Squibb Co (NYSE:BMY) September 63 put recommendation, all in in just two weeks. Below, we will unpack how this trade ultimately played out, and dig into the reasoning behind this bearish bet on the drugmaker.

At the time of our recommendation on Sept. 5, the declining 50-day moving average had just rejected the shares. The security was also underperforming compared to its pharmaceutical industry peers, down 14% for the year, while its 14-day relative strength index (RSI) turned over from a brief "overbought" condition.

BMY 50 Day

Meanwhile, short interest had more than tripled in the most recent two-week reporting period, with bears seemingly providing major headwinds. BMY also boasted affordable premiums, per its Schaeffer's Volatility Index (SVI) of 16% that sat higher than only 4% of annual readings. In other words, traders were pricing in low volatility expectations.

While Bristol-Myers Squibb stock attempted a small rally after our recommendation, the aforementioned 50-day trendline capped this upward movement. The security then hit a Sept. 15, one-year low of $58.86, which prompted us to exit the position, allowing subscribers to collect a 107% profit in just 10 days.


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