Schaeffer's Trading Floor Blog

Most Active Options Update: Pfizer Inc. (PFE)

Subtitle: Pfizer Inc. speculators place bullish bets at a discount

by 6/16/2014 2:53 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One name of notable interest among short-term call players this afternoon is Pfizer Inc. (NYSE:PFE). Falling off the list since last time were MannKind Corporation (NASDAQ:MNKD), eBay Inc (NASDAQ:EBAY), and Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR).

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Pfizer Inc. is up 0.4% today to trade at $29.64, after announcing the opening of a new Research and Development facility in Cambridge, Mass., which will allow researchers to work closely together in the development of innovative therapies. Option traders have responded to the good news by placing short-term bets on the equity, particularly on the call side of the aisle. Digging deeper into the data shows June- and July-dated options account for nine of the 10 most active strikes, and more than two times as many calls as puts have been exchanged thus far.

The July 32 call is the most popular PFE option today, and at last check, about 3,200 contracts had changed hands here. Given that 60% of the contracts went off at the ask price, and implied volatility at the strike has ticked higher, speculators may be opening long bullish positions on the stock. In other words, the call buyers are betting on PFE traveling north of $32 by the close on Friday, July 18, when soon-to-be front-month options expire.

Pfizer has closed north of the strike price just once since April 4. In fact, the equity has been moving sideways for the past month, tacking on less than 2% during this time period. As such, delta on the aforementioned call sits at .072, meaning there is a 7.2% chance the option will be in the money at expiration. Nevertheless, the call buyers were able to purchase their bets at a relatively cheap price (from a volatility perspective), as PFE's Schaeffer's Volatility Index (SVI) of 14% ranks lower than 89% of comparable readings taken during the past year.

Looking back over the last two weeks shows that today's call activity is just par for the course for Pfizer Inc. (NYSE:PFE). The stock sports a top-heavy 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio of 8.99, which ranks in the top 6% of its 12-month range. In other words, roughly nine calls have been bought to open for every put recently -- representing a near-annual-high rate, from a historical standpoint.


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