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A New Product Could Boost this Stock

A New Product Could Boost this Stock

In the 1990s, the CAN SLIM investment strategy was popular. Each letter summarized the factor investors looked for. The most important factor was the N, which stood for new highs, new products or new managements. Newness often boosted a stock.

This could help Veeva System which recently announced a new product as Business Wire recently reported,

Veeva Systems (NYSE: VEEV) announced Veeva SiteVault Free, a free eRegulatory solution built specifically for clinical research sites. The news comes as the stock is near support.

VEEV daily chart

Veeva SiteVault allows sites to more effectively manage regulatory documents and trial processes to speed study activation and improve investigator site file management. Now all sites can have access to a modern cloud solution to streamline trial activities and accelerate clinical research.

“Veeva aims to simplify study execution so sites can focus on the critical work of clinical research and patient care,” said Peter Gassner, founder and CEO of Veeva. “We’re proud to partner with the clinical research community to help simplify and accelerate the process of getting important medicines to the patients who need them.”

Veeva SiteVault reduces the administrative burden of managing regulatory documents and processes with capabilities such as electronic signatures, remote monitoring, certified copy workflows, and reporting. Veeva SiteVault can be used for all trials regardless of what technology sponsors are using, as well as the site file for investigator initiated trials. Both editions, SiteVault Free and SiteVault Enterprise, support compliance with 21 CFR Part 11 and HIPAA requirements.

SiteVault Free supports an unlimited number of users and comes with full customer support from Veeva. Planned for availability in December 2019, sites can sign up for SiteVault Free ahead if its release at sites.veeva.com.

SiteVault Enterprise is a fully configurable edition of Veeva SiteVault that includes open APIs for integrations, customized reports, and tailored workflows. SiteVault Enterprise is available today and used by leading research organizations such as IACT Health, Ora, Inc., Penn Medicine, and University of Louisville.

Veeva is the leading provider of clinical operations technology with more than 200 sponsors using Vault eTMF or Vault Study Startup, including 12 of the top 20 global biopharma companies. In the second half of 2020, Veeva plans to enable automated document and data sharing from sites using Veeva SiteVault to sponsors that are using Vault eTMF or Vault Study Startup.

Support is also visible on the weekly chart of the stock.

VEEV weekly chart

A Trade for Short Term Bulls

As with the ownership of any stock, buying VEEV could require a significant amount of capital and exposes the investor to standard risks of owning a stock.

To reduce the risks of a trade, an investor could purchase a call option. This allows them to benefit from upside moves in the stock while limiting risk to the amount paid for the options. However, buying a call option can also require a significant amount of capital and includes the risk of a 100% loss.

Whenever an option is bought, the maximum risk is always equal to 100% of the amount of spent to purchase the option. Since options cost significantly less than a stock, the risk in dollar terms will usually be relatively small to own an option.

To further limit the risks of the trade, an investor could use a bull call spread. This strategy consists of buying one call option and selling another at a higher strike price to help pay for the cost of buying the first call. The spread strategy always reduces the risk of an options trade.

This strategy is designed to profit from a gain in the underlying stock’s price but has the benefit of avoiding the large up-front capital outlay and downside risk of outright stock ownership. The potential risks and rewards of this strategy are summarized in the chart below.

bull call spread

Source: The Options Industry Council

Both the potential profit and loss for the bull call spread are limited. The maximum loss is equal to the net premium paid when the trade is opened. The maximum profit is limited to the difference between the strike prices, less the debit paid to put on the position.

This strategy could be especially appealing with high priced stocks where the share price and options premiums are often a significant commitment of capital for smaller investors.

A Specific Trade for VEEV

Every day, we scan the markets looking for trades with low risk and high potential rewards. These trades are available almost every day and we share them with you as we find them. Now, it’s important to remember these are trading opportunities in volatile stocks.

When we find a potential opportunity, we evaluate it with real market data. But because the trades are volatile, the opportunities may differ by the time you read this. To help you evaluate the current opportunity, we show our math and explain the strategy.

For VEEV, the October 18 options allow a trader to gain exposure to the stock.

An October 18 $155 call option can be bought for about $2.60 and the October 18 $160 call could be sold for about $1.54. This trade would cost $1.06 to open, or $106 since each contract covers 100 shares of stock.

The amount paid to enter the trade is the largest possible loss on the trade. This is generally true whenever a trader is creating a debit to enter an options trade. “Creating a debit” means there is a cost to enter the trade. You could create a debit by simply buying puts or calls to open a directional trade.

In this trade, the maximum loss would be equal to the amount spent to open the trade, or $106.

The maximum gain on the trade in VEEV is equal to the difference in exercise prices less the amount of the premium paid to open the trade.

For this trade in VEEV the maximum gain is $3.94 ($160- $155= $5; $5 – $1.06 = $3.94). This represents $394 per contract since each contract covers 100 shares.

Most brokers will require minimum trading capital equal to the risk on the trade, or $106 to open this trade.

That is a potential gain of about 271% based on the amount risked in the trade. The trade could be closed early if the maximum gain is realized before the options expire.