Schaeffer's Trading Floor Blog

Fast Start to New Year Prompts Pfizer Inc. (PFE) Bulls

Call buyers have shown increased interest in PFE lately

by 2/4/2014 11:55 AM
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Pfizer Inc. (NYSE:PFE) has been on options traders' bullish radar in recent weeks. During the last five trading days, for example, speculators on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open nearly six calls for every put.

Even after taking a step back to include 10 sessions' worth of data -- including information from the NASDAQ OMX PHLX (PHLX) -- the bias toward long calls over puts remains. Specifically, PFE's 10-day ISE/CBOE/PHLX call/put volume ratio checks in at 4.56 -- up from 2.35 to start the year. To put things further into perspective, the current ratio ranks higher than 96% of similar readings from the last 12 months, meaning traders have scooped up calls (relative to puts) at a much faster-than-usual clip during the previous two weeks.

Currently, peak front-month call open interest resides at the February 31 strike, which is home to nearly 38,000 contracts -- most of which were bought to open. With Pfizer's 2.7% move higher today to trade at $31.43, these options are now in the money.

On a related note, open interest in the pharmaceutical issue's short-term options is call-heavy. Schaeffer's put/call open interest ratio (SOIR) for PFE registers at 0.58, meaning call open interest nearly doubles put open interest among options expiring in the next three months. More significantly, the SOIR sits in the low 6th percentile of its annual range, confirming a stronger-than-usual preference for short-term calls over puts, relatively speaking.

On the charts, Pfizer Inc. (NYSE:PFE) has added a respectable 15% on a year-over-year basis. More recently, the stock could be seen outperforming the broader Dow Jones Industrial Average (DJI) during the past month, gapping higher on a fourth-quarter earnings beat last Tuesday, and bucking yesterday's broad-market sell-off, thanks to a successful mid-stage trial for its breast cancer treatment. Additionally, the equity received an upgrade to "buy" from "hold" and a price-target hike to $38 from $33 at Jefferies this morning.

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