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6 Call Contenders: Pharmaceuticals

Try call positions in these pharma stocks


Each week I use my Power Stocks scanner to find the best stocks for options trading. The ones that caught my attention this week had all of the qualities I look for in a call option—the potential for a big move up (volatility) based on technicals and past activity in the stock, and good liquidity. All of these are names you’ll recognize, and for good reason—options which do not have liquidity may trap you into a position, or prevent you from taking a large enough position to make the transaction worthwhile.

The following stocks have those qualities I look for. I’ll leave it up to you to decide which strike price and month are appropriate for your trading style, but be sure to give yourself enough time to be right. I’ve also included the support and volatility levels my scanner has detected for these stocks. The average level of volatility is 20.

  • Coventry Health Care (NYSE:CVH): CVH closed on Friday about a dollar above its $47 support. My Power Stock scanner has rated the stock’s volatility at 10, about half the average.
  • Bristol Myers Squibb (NYSE:BMY): BMY is trading at $40, just above support at $38. This may signal a good entry point for a long position or at the money calls. The volatility rating is 14.
  • Eli Lilly (NYSE:LLY): LLY dropped fractionally in Friday’s trading—a good sign for those who want to buy at a bargain. Volatility is rated at 16.
  • Merck (NYSE:MRK): Support for MRK is at $43, about $2 below where it closed on Friday. The volatility rating is 15.
  • Astrazeneca (NYSE:AZN): Support is at $47, and the volatility rating is 16.
  • Boston Scientific (NYSE:BSX): BSX has an above-average volatility rating at 26, making it a slightly more risky play. The stock closed below its established support of $8.

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