In September 2015, Hillary Clinton excoriated price-gouging at Martin Shkreli's Turing Pharmaceuticals. Her tirade sent biotech shares down broadly. Then in August of this year, Clinton criticized Mylan (MYL) for its pricing tactics on the EpiPen.
Clinton has been associated as being a negative for health-care stocks ever since she chaired the task force for the Health Security Act as first lady during Bill Clinton's presidency in 1993. That bill failed to get out of Congress and was panned by the insurance industry.
It wasn't until after the first presidential debate on Sept. 26 that the consensus switched from this being a hotly contested race to being an apparently sure Clinton victory. When the race was uncertain, Clinton's comments against health-care pricing practices were perceived by the market as a threat and resulted in declines in health-care stocks.
As the situation stands now, Clinton is the presumptive future president, and the market has had time to price in the perception that Clinton is bad for health-care stocks. That change from perceived market risk to reality may mark the sentiment low on this narrative. I think pharmaceutical companies are now wary of this kind of adverse headline risk and will be more careful. I also don't expect Clinton to announce any sweeping adverse pharmaceutical price controls or similar measures. If that were to happen, that would negate my thesis that the Clinton-related health-care sentiment may be at a low. From that perspective I favor making selective health-care bets when health-care underperforms the broad market.
These aren't corrected for overlap, but they suggest that ABBV tends to bounce following 1% daily declines. Combined with my sentiment thesis, I'd suggest looking 10 days out and possibly selling the ABBV Oct. 28 57.5 puts for about $0.50.