Daily Data: Thermo Fisher Scientific, Inc. (TMO)
This week, we were stopped out of our May'18 55/50 bull put spread in Thermo Scientific. Before our entry, the data on TMO showed a worst return of +2% from March to April option expiration for the past 9 years. Yes, that's correct, the worst return for TMO has been a positive 2% during this time period. A 2% increase from TMO's March option expiration price (57.91) implies a May expiration price of $59.06. Given that TMO is currently trading 10% below its estimated max low price for May'18, I'm still attracted to the stock. The May'18 50/45 bull put spread looks good for a sell limit entry of 0.55.
If you're less faithful in historical returns then I recommend looking long TMO short S&P 500 SPDRs (SPY) for a quick 1%-2% gain from the chart show below:
The chart above shows the basis between TMO and SPY. If I entered a long TMO / short SPY position I would have a stop on the basis at 0.38 and look for a profit at 0.405. Additionally, other medical instrument companies are looking undervalued heading into earnings and have good historical results. We are also a fan of TMO's competitors Becton Dickinson (BDX), Perkin Elmer (PKI), and Agilent Technologies (A).
Suggested Trade: TMO - Sell May'18 50/45 put spread (Bull Put Spread)
- (Sell 50 Put/Buy 45 Put)
- Size - 5% of Option Spread Portfolio Size = (2 spreads)
- Entry: Sell Limit: 0.55
- Stop Loss: 1.15
- Exit Price: 0.00
- Max Return: 12.35%
- (Max Return Calculated on Return on Risk from my entry, not Return on Margin)
Charts are from Finviz.com.
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in TMO over the next 72 hours. We may short SPY.