Trading Idea for Genzyme (GENZ) via Options

11/18/2009 12:01 am EST

Focus: OPTIONS

Traders and investors looking for a rebound in Genzyme Corp. (GENZ) shares might consider a call spread as way to play the bull side with less risk than buying the stock. GENZ fell in August to levels not seen since 2004 and last week dipped below $50 again.

This January out-of-the-money spread can be purchased for $1 and offers a potential return on risk of 400% if GENZ is able to climb back to $60.


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GENZ Debit Spread Trade Detail

GENZ is currently trading around $50 at the time of this writing.

Debit Spread/Bull Call Spread:

    * Buy the January 55 call (out of the money) for $1.40 per contract
    * Sell the January 60 call (out of the money) for $0.40 per contract
    * Net debit of $1 (or $100 per spread)

Profit/Loss Details: Maximum risk is $1 (the debit paid at the time of the trade), plus commissions.

Maximum Potential Profit is $4 (the difference between strike prices—$5—minus the debit of $1). Return on risk is approximately 400%.

Break Even: $56 (the strike price of the purchased call plus the debit paid).

By the Staff at ONN.tv

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