Turn Bristol-Myers Squibb into an Income Machine with This Options Play

With markets coming in to a volatile time of year, investors might be more interested in generating income rather than capital gains. 

Bristol-Myers Squibb (BMY) has long been a staple of dividend investors and with the stock showing a low Beta of 0.22 and a high yield of 3.90%, it provides an attractive opportunity for savvy investors.

Using options we can more than increase the yield on our BMY shares by using a covered call strategy.

A covered call involves selling call options against a stock position.

BMY Covered Call Example

Buying 100 shares of BMY would cost $6,761. The September 18, 2026 call option with a strike price of $70 was trading around $1.12 on Wednesday, generating $112 in premium per contract for covered call sellers. 

Selling the call option generates an income of 1.7% in 30 days, equalling around 20.5% annualized. 

Covered call traders also receive the yearly dividend of $4.12 which is a yield of 2.81%.

The covered call option premium brings the total annualized yield up from 3.90% to 24.40%.

That’s a pretty attractive yield for a low-beta, defensive stock and a lot more than what regular shareholder receive.

This also assumes the stock stays exactly where it is. What if the stock rises above the strike price of $70?

If BMY closes above $70 on the expiration date, the shares will be called away at $70, leaving the trader with a total profit of $351 (gain on the shares plus the $112 option premium received). That equates to a 5.3% return, which is 64.2% on an annualized basis.

Of course, the risk with the trade is that the BMY might drop, which could wipe out any gains made from selling the call.

Company Details

Bristol-Myers Squibb is a one of the leading global specialty biopharmaceutical companies focused on the development of treatments targeting serious diseases like cancer, inflammatory, immunologic, cardiovascular or fibrotic diseases.

Backed by its blockbuster immuno-oncology drug, Opdivo, Bristol-Myers has a strong oncology portfolio, comprising other drugs like Revlimid, Pomalyst, Sprycel, Yervoy and Empliciti.

It also has important immunology and cardiovascular drugs like Orencia and Eliquis.

It's experiencing growth in both the Eliquis brand and the market, while also advancing its Factor XIa inhibitor program.

After the sale of the global Diabetes business to AstraZeneca and the discontinuation of discovery research efforts in virology, it's focusing solely on research in core therapeutic areas like oncology, immuno-oncology, immunoscience, cardiovascular, fibrosis and genetically defined diseases.

It acquried Celgene Corporation and MyoKardia. It received regulatory approvals for Reblozyl and Inrebic.

Barchart Technical Opinion

The Barchart Technical Opinion rating is a 100% Buy and ranks in the Top 1% of all short term signal directions.

Long term indicators fully support a continuation of the trend.

Implied volatility is at 28.02% compared to a 12-month low of 20.52% and a 12-month high of 40.88%. 

Bristol-Myers Squibb rates as a Strong Buy according to 11 analysts with 1 Moderate Buy rating, 17 Hold ratings and 1 Strong Sell rating.

Low beta stocks such as Bristol-Myers Squibb are a common component of most investment portfolios and now you know how to generate an extra income from your BMY position.

Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.