Drug News Has Pfizer Inc. (PFE) Options in High Demand

Pfizer Inc. (PFE) touched a nearly 11-year high earlier

by Digital Content Group

Published on Mar 23, 2015 at 12:23 PM
Updated on Jun 24, 2020 at 10:16 AM

Pfizer Inc. (NYSE:PFE) is fresh off a decade-plus high of $35.26 -- and helping to lift the Dow higher -- after the company announced it will resume a phase 3 trial of pain drug tanezumab, along with partner Eli Lilly and Co (NYSE:LLY). Also helping to account for PFE's 2.8% advance to sit at $35.21 is a price-target hike to $45 at Jefferies, which reiterated its "buy" opinion. In response, short-term traders have rushed the stock's options pits.

Diving right in, PFE options are crossing at seven times the expected intraday rate, with calls more than doubling puts -- 76,000 contracts to 35,000. One notable transaction involved a block of 10,200 weekly 4/10 35-strike puts and a matching lot of weekly 4/10 35-strike calls. Based on data from Trade-Alert, this is likely a long straddle, purchased for a net debit of 99 cents per pair of contracts -- or about $1 million total (net debit * number of contracts * 100 shares per contract).

More straightforward activity is transpiring at the weekly 4/2 35-strike call, where a number of contracts -- including a block of 4,209 -- are being bought to open. In other words, these speculators are banking on PFE to extend its run north of $35 through the close on Thursday, April 2, when the weekly options expire.

Taking a step back, traders have preferred short-term Pfizer Inc. (NYSE:PFE) calls over puts for some time. The pharmaceutical stock's Schaeffer's put/call open interest ratio (SOIR) of 0.41 indicates call open interest more than doubles put open interest, among options set to expire in the next three months. What's more, this SOIR rests in the bottom quartile of its annual range.


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