With the bulls running anew on Wall Street , it’s easy to assume all stocks are galloping higher. But sadly, ’tis not so. Some industries are being shut out altogether from the bullish revelry.
Chief among them are biotech stocks which have cobbled together a weak-sauce bounce that is falling apart as I type. One of the worst performers of the group is Regeneron Pharmaceuticals Inc (REGN).
Today, Regeneron stock is the poster child of pain. Allow me to illustrate.
Though the opening bell isn’t that far gone, REGN has already fallen 4.5% on heavy, heavy volume. We’re not even two hours into the trading session and volume is already closing in on yesterday’s trading volume for the entire day. By day’s end Regeneron stock will undoubtedly suffer a significant distribution day.
But that’s not all. A look at the big picture also reveals weakness aplenty. Year-to-date, REGN is down over 30%. Not surprisingly, the once high-flying biotech beauty finds itself locked in a downtrend beneath all major moving averages. Traders have donned their sell-the-rallies caps and seem altogether unwilling to take them off.
Today’s shellacking may well be the signal onlookers have been waiting for to suggest the next down-leg is kicking off. The month-long rebound in Regeneron stock has terminated and support has been breached.
Inject Profits Into Your Portfolio with Regeneron Stock Options
Traders looking to profit from continued weakness from Regeneron but unwilling to trade the underlying stock on account of its rich price tag might consider playing in the options mart.
REGN options are expensive in their own right but we can structure a spread trade to contain the cost, and therefore the risk, of the trade.
Buy the May $375/$355 put spread for $7.85 or better. The vertical spread consists of buying to open the May $375 put while selling to open the May $355 put. The max loss is limited to the initial $7.85 debit and will be forfeited if Regeneron stock sits above $375 at expiration.
The max gain is limited to the distance between strikes minus the net debit, or $12.15, and will be captured if REGN can fall below $355 by expiration. Regeneron options are somewhat illiquid so be sure to use limit orders to ensure a decent fill.
At the time of this writing Tyler Craig had no positions on any of the aforementioned securities.
