Summary
- To me, special situations give investors the opportunity to enhance their total return.
- With little downside risk potential and annualized returns of more than 30%, Celgene shares are worth looking at right now.
- Volatility has spiked recently, and looking to shelter your investment portfolio from sizable storms is appropriate.
Introduction
First and foremost, I love special situations which Mr Market is dead wrong about. Most investors are stepping away from companies that will be acquired soon supposing they won't generate additional returns. Nonetheless, these kinds of situations offer opportunities for both short-term and long-term option investors looking for little downside risk. In this article, I'll take a closer look at Celgene's (CELG) situation and explain how you can boost your annualized returns using covered calls. You can find more information about my favorite option strategy right here.
The Terms Of The Deal
According to the press release, the shareholders of Celgene will receive $50 per share in cash and one share of Bristol-Myers Squibb (BMY) for each share of Celgene they own. Based on today's BMS' share price, Celgene shareholders are expected to receive approximately $100, which doesn't' include a possible one-time payment of $9.00 if Celgene's ozanimod, liso-cel and bb2121 get the FDA approval. To me, this deal is vital as both parties need to join forces and generate tonnes of annual synergies. Worth to note: Bristol-Myers Squibb expects the deal to close in the third quarter of this year.
However, when looking at today's price level, Celgene's share price got stuck in the range of $88-$89, creating opportunities for both short-term and long-term investors.
