Juno Therapeutics Inc (NASDAQ:JUNO) has a lot going for it off and on the price chart. That doesn’t mean you shouldn’t immunize JUNO stock against the always-real bearish threats. To do that, we’ll explore a fully-hedged, collar-based therapy program. Let me explain.
JUNO has been hot the past month and maybe for a good reason. Shares of the immunotherapies biotechnology upstart have been bid up 66%. The bulk of the gain occurred over a handful of sessions following the acquisition of CAR-T competitor Kite Pharma Inc (NASDAQ:KITE) by Gilead Sciences, Inc. (NASDAQ:GILD).
Bottom line, JUNO is still not profitable. Considering its own healthy, yet speculative, pipeline of CAR-T therapies and the “who’s next” promise imbued by Gilead’s buyout move, can investors be blamed for their excitement? Probably not.
But there is more to today’s promising story-line as well. Novartis AG (ADR) (NYSE:NVS) recently secured the first-ever FDA approval for a CAR-T cancer therapy. As much and as InvestorPlace’s James Brumley thoughtfully detailed earlier this week, the combined actions of Gilead and Novartis are significant for this promising technology and for JUNO.
Further, with a supportive stake from biotech giant Celgene Corporation (NASDAQ:CELG) and plenty of cash in the coffers to continue as its own ongoing entity — conditions are looking attractive off the chart for Juno Therapeutics.
With JUNO stock looking pretty healthy in its own right, our thoughts are that bulls could be onto something. That said, bullish investors will still need to shake off a Wednesday evening report, which found Juno issuing a $225 million common stock follow-on offer to be used for general corporate purposes and working capital.
JUNO Weekly Chart
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Now and nearly a month into the move shares of JUNO have continued to impress. The stock has been busy digesting its fast and aggressive gains as its nudged higher in a momentum style price trend while breaking slightly above the 50% Fibonacci level.
In our view and given the technical work that’s been accomplished, persistent overbought conditions evidenced by JUNO’s price relative to its upper Bollinger Band and elevated stochastics readings are less troubling.
In fact, the action hints this could be an instance where trend persistence will remain in place and benefit bulls willing to commit to a more speculative trade.
JUNO Stock Collar
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As of Wednesday night’s close and shares of Juno at $45.21, the fully-hedged position is priced for even money. Thus, instead of simply buying JUNO stock and not really knowing where your risk is given the propensity for volatile gaps, the collar ensures a protective line in the sand at the purchased $37.50 put.
That’s nice insurance to have on hand. The risk offset doesn’t cost a cent and it’s priced for the same amount as owning JUNO stock outright! Of course, the collar has its limitations: You don’t get something for nothing.
Here, the catch is the potential opportunity cost at $55 as the call has been sold to finance the protective put. Bottom line, coming from a short call 22% that’s out-of-the-money, a JUNO collar like this one makes a good deal of sense without costing any!
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits and feel free to click here to learn more about how to design better positions using options!
