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We have been managing a position in Boston Scientific (NYSE:BSX) since mid-February of this year. BSX is a medical device company that manufactures coronary stent systems, cancer treatment catheter systems, Parkinson’s deep brain stimulation systems and more.
BSX had two setbacks this year. In mid-March, the stock dropped on news that its rival, Edwards Lifesciences Corporation (NYSE:EW), had received good results in its Sapien 3 transcatheter aortic valve trial, which has the potential to take market share away from BSX. One month later, the stock dropped after the Food and Drug Administration ordered BSX to stop selling one of its medical devices.
In the interim, we’ve managed to successfully sell two covered calls. The stock has recovered slightly over the last month, but because of its technical situation, we think now is a good time to open another one.
Recovering After Issues with the FDA
After the FDA cited safety concerns about a surgical mesh BSX developed to repair pelvic organ prolapse in women, the stock dropped to just above the $36 level. It bottomed out at around $34 before heading back up.
In late April, the FDA did approve a different medical device: the LOTUS Edge Aortic Valve System. That news sent the stock higher.
BSX is in a good position fundamentally. Its earnings were strong, and it just acquired Vertiflex, Inc., which will expand the products it offers. Both are reasons we don’t mind holding the stock. However, there is a chance it struggles in the short term, and a covered call is a good way to take advantage.
A Short-Term Trade to Earn Income
Looking at the chart below, we can see that BSX has been slowly making its way toward its recent highs. In the last week, it tapped resistance at $38.50, and we think there’s a chance it will stay below the $38 level for the next week. If that’s the case, we have a good opportunity to collect some premium on the stock now.
Daily Chart of Boston Scientific (BSX) — Chart Source: TradingView
Because BSX has been strong lately, we don’t want to go too far out with our expiration. A short-term covered call to generate income is really the best option.
To find out which BSX puts we’re selling — and to get access to our full portfolio of income-generating trades — consider signing up for risk-free trial subscription to Strategic Trader today.
InvestorPlace advisers John Jagerson and S. Wade Hansen, both Chartered Market Technician (CMT) designees, are co-founders of LearningMarkets.com, as well as the co-editors of Strategic Trader.
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