Novo Nordisk A/S (NVO: NYSE)
Price at Preparation: $103.26 (EOD Wednesday Nov 22, 2023)
What they do
Novo Nordisk A/S is a global healthcare company engaged in diabetes care. The Company is also engaged in the discovery, development, manufacturing and marketing of pharmaceutical products. The Company operates through two business segments: diabetes and obesity care, and biopharmaceuticals. The Company’s diabetes and obesity care segment covers insulin, GLP-1, other protein-related products, such as glucagon, protein-related delivery systems and needles, and oral anti-diabetic drugs. The Company’s biopharmaceuticals segment covers the therapy areas of hemophilia care, growth hormone therapy and hormone replacement therapy. The Company is most recently known for Ozempic and Wegovy, however also offers Saxenda to treat obesity. It offers a range of products, including NovoLog/NovoRapid; NovoLog Mix/NovoMix; Prandin/NovoNorm; NovoSeven; Norditropin, and Vagifem.
Welcome to this week’s exploration—a labyrinth of intricacies promising potential. Picture this: Ozempic struts its stuff while NVO stretches its wings, signaling a probable ascent. Let’s unravel our roadmap possibilities to maneuver through this landscape of this trade shrewdly. Here at Theta Bandits, our playbook dances around “Other People’s Money” (OPM), skillfully wielding available tools. Below, we sketch out our tactical blueprint, considering the rhythmic dance of technical analysis embedded in the accompanying stock chart. Our game plan involves navigating potential swings both up and down, sculpting a flexible strategy to seize those moves. Remember, our North Star remains pocketing profits while paring down potential losses.
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Let’s dive into this strategy by first checking out the diagram below for a visual roadmap. Even though the chart might seem to be in a sideways shuffle, those bright green higher lows hint at something exciting—a potential upward swing. On the flip side, the blue markings tell us we’re toeing the line of a tough nut to crack—the 52-week highs, a formidable resistance point. History tells us that breaking through might not happen straight away; chances are, the stock might briefly cross or bounce off this barrier, possibly dipping to those dashed orange support lines. Think of those orange lines as safety nets—if the stock breaks through, it’s likely to drop to the next support before gearing up for another shot at that resistance to the upside. Now, the stock’s eyeing a 1-year price target of $110, which is a modest 6.5% bump from current levels. The big question: how can we squeeze more juice out of this lemon?
Here’s the entry plan: a Cash Secured Put (CSP) option, which is selling a single contract (100 shares equivalent) at either $95 (1) or $92.5 (2) strike prices, depending on the expected retracement. These strike prices align with potential support zones, where we anticipate a bounce. Our main gig here? Raking in those premiums. In a dreamy scenario where the stock glides north, we skip owning the stock equity, happily repeating the premium collection. But, in the nightmare scenario of the stock plunging below the strike price, we’ll get ready to cough up $9,500 (1) or $9,250 (2) for those assigned shares depending on our CSP strike.
Alright, here’s the follow-up act: once those shares are in our lap (thanks to Part 1), it’s time for a Covered Call (CC) option show. This move is all about balance—balancing premiums with the possibility of the stock skyrocketing. Given the pesky resistance at $105 (let’s pretend), we’re eyeing a strike price at that level. Setting the expiry around earnings report periods could spice things up nicely. If the stock flexes and lands ‘In The Money’ (ITM) above the strike price, we cash out selling those shares at $105 a pop plus the premium for a nice profit. But if it hangs ‘Out The Money’ (OTM) below that $105 strike price, we pocket the premium and get ready for another round of selling.
Now, about risk—every trader’s best frenemy. That orange line number 3 on the diagram? That’s a milestone. Cross it, and we’re likely breaking the rhythm of those uplifting higher lows. Translation: a probable nosedive. Here’s the drill at this point: scoop back that covered call option and offload the shares pronto to curtail the losses. Yeah, we might take a hit selling the stock, but hey, fingers crossed that the CSP and CC premium collection kept us floating around the break-even mark or better.
Remember, folks, trading’s a rollercoaster of risks. Strap on your seatbelts, aim for the stars, but always keep a safety net handy to cushion any bumpy rides to limit the losses while chasing those gains!
The truth is that trading and risk go hand in hand. This trade is using a wide variety of concepts – possibly unfamiliar territory for some. Part 3 of our plan does map out some safeguards, but this trade is potentially capital intensive so please dissect, review and be comfortable with the plan before taking any action. There is no shame in flexing those trading muscles in a “paper account” – consider it a practice arena – before putting any hard-earned money to work.
Disclaimer: This article is for informational and educational purposes only, not investment advice. We recommend researching and consulting with a financial advisor before making investment decisions. All actions based on this information are at your own risk.