Blue-Chip Drug Stock Could Keep Lapping Broader Market

Short-term options traders are much more put-biased toward Merck stock than usual

CMT, Senior Market Strategist
Jul 22, 2022 at 8:00 AM
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Blue-chip pharma stock Merck & Co., Inc. (NYSE:MRK) has strongly outperformed the broader market, to the tune of a nearly 22% year-to-date gain. The shares broke out in 2022 from a three-year major consolidation area, which was capped by the round-number $200 billion market cap level. With this level now cleared, there’s enough pessimism around Merck stock that could unwind and fuel a sustained push higher.

MRK stock, Merck stock, stock picks


For starters, half of the 16 covering analysts sport tepid “hold” ratings, indicating a round of overdue upgrades could boost MRK.

Plus, the Merck stock options pits are swarming with put traders. At the ISE/CBOE/PHLX, MRK sports a 10-day put/call volume ratio of 1.06 that stands in the 97th annual percentile. Echoing this, MRK's Schaeffer's put/call volume ratio (SOIR) of 0.95 also ranks in the highest percentile of the past 12 months. In other words, short-term options traders are much more put-biased toward Merck stock than usual at the moment. 

Tony Venosa, CMT, is a Senior Options Strategist at Schaeffer's Investment Research. He's has over 20 years of trading experience under his belt -- including a stint in the mid-'90s clerking in the S&P 500 trading pits in Chicago, plus time spent as a commodity broker and proprietary day trader. A graduate of Miami University with a B.S. in finance and decision sciences, Venosa earned his Chartered Market Technician designation in 2008, and has been part of Schaeffer's in-house research team since 2010.

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