$6 Million Trade Highlights Pfizer Inc. (PFE) Options Feeding Frenzy

Pfizer Inc. (NYSE:PFE) options traders are making major moves amid today's tax inversion hoopla

Apr 5, 2016 at 3:36 PM
facebook twitter linkedin

Pfizer Inc. (NYSE:PFE) is up 1.8% at $31.28, with today's volume nearly doubling its previous annual high, amid the potentially damaging news surrounding its merger with Allergan plc Ordinary Shares (NYSE:AGN). In fact, Reuters reported this afternoon that PFE is now leaning toward walking away from the deal, and options volume is surging as a result.

PFE's 30-day at-the-money implied volatility has jumped almost 16% to 19.5%, reflecting increased volatility expectations. Further, options volume is four times the expected intraday total, and on pace to surpass the Aug. 4 high, thanks to several large-block trades.

According to the International Securities Exchange (ISE), it looks like one trader simultaneously bought to open identical 21,000-contract blocks of the January 2017 28-strike put and 32-strike call for $1.38 and $1.52 per contract, respectively. The volatility strategy -- known as a "long strangle" -- was opened for a net debit of $2.90 per pair of contracts, or nearly $6.1 million (net debit * 100 shares per contract * number of spreads). The buyer will make money the lower PFE falls beneath $25.10 (put strike minus net debit) or rallies north of $34.90 (call strike plus net debit) by January options expiration.

Elsewhere, a sale of 10,000 Sept. 30 calls crossed earlier, as well as a sale of nearly 11,500 January 2017 30-strike calls. It's possible these were traders cashing out of their positions amid today's rally in the shares, according to Trade-Alert

Before today, it had been PFE puts that were in high demand. The stock's 10-day put/call volume ratio at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 1.10 -- in the 87th percentile of its annual range. However, options were popular on both sides of the aisle, as put and call open interest are at annual highs.

Pfizer Inc.'s (NYSE:PFE) rally has it on pace for its best finish in months, with help from news that the company's psoriatic arthritis drug, tofacitinib, met its main goals in a phase 3 study. However, the stock could run into a wall in the $31.50-$32 area, which acted as support in the latter half of 2015.  

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Now is the time to join our thriving community of Event Traders who consistently profit from every earnings season. With this discounted subscription opportunity, you'll stay ahead of the curve and seize opportunities others miss. Do not let Q3 earnings season pass you by – subscribe now and supercharge your portfolio with expert insights that turn market reactions into profit-generating opportunities!! Don't waste another second... join us right now before the next trade targeting +200% is released!