Taking a little gamble on BMY CVRs

[Fermion]

The buyout of Celgene by Bristol Meyers Squibb came with a payment of $50 and 1 share of BMY for each share of Celgene. There was also a CVR for three of Celgene's late trial stage drugs which pays an all or nothing $9 if all three drugs are approved. BMY calculated the present value of this CVR at $3.80 and it now trades separately on the exchange with the ticker BMY.RT (on etrade at least). Today it was trading for $2.09 so I bought 10,000 of them in one of my IRAs.

It is something I probably would have done in my Robinhood trading contest account (maybe more like 1000) but Robinhood doesn't support them.

Anyway, it is an interesting gamble and has a pretty nice risk/reward ratio with the probability calculated at 42% overall success rate. I plan to just hold them until they climb higher to the true present value (maybe sell them for $3.50 or so). Biggest short term risk here is one of the three drugs is pulled from the trial early, but that is why I only bought 10,000

 

[jim584672]

Good luck. I had some of BMY.RT land in my account and sold them.

 

[Fermion]

Good luck. I had some of BMY.RT land in my account and sold them.

Thanks. I very likely won't hold them until the end, but rather will sell them on a spike if/when 1 of the 3 drugs gets approval. I would be super happy just making a short term 50% on the trade, which is only having the CVR move a bit closer to the value calculated at the buyout.

We may get a bump this Dec 2 since BMY has a FDA decision coming up then. It isn't related to the CVR but I bet a rising tide would lift all boats.

 

[Fermion]

Well dang...up about $8,000 on that...unexpected...