Options Bears Step Up as Pfizer Inc. (PFE) Continues to Fall

Pfizer Inc. (NYSE:PFE) put options have been popular in recent weeks, as the shares slip

Oct 13, 2016 at 11:40 AM
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Dow stock Pfizer Inc. (NYSE:PFE) has been trending lower since its 12-year high in early August. Looking closer, PFE shares have dropped over 12% since their Aug. 1 peak at $37.39, including today's 0.8% decline to trade at $32.82. Currently weighing on PFE stock is news the company lost its patent-ruling appeal in the U.K. for one of its top-selling drugs, Lyrica. This, along with some downbeat analyst attention, could have recent option bears cheering. 

Specifically, PFE's 20-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has jumped to 1.46 -- with 31,942 puts bought to open during the past month, versus 21,840 calls. What's more, this ratio is almost four times higher compared to where it was one month ago, pointing to an influx in put buyers. 

When looking at other data points, though, sentiment among short-term options traders is decidedly call-skewed. Specifically, the stock's Schaeffer's put/call open interest ratio (SOIR) comes in at 0.55, and sits just 2 percentage points from a 12-month low. This is due to call-heavy near-term strikes.

For instance, PFE's November 33 call currently has 32,721 contracts in residence, versus 9,455 contracts open at its December 32 put. These options hold the top open interest positions for a call and a put among standard monthly options expiring in three months or less.

Elsewhere, there's been some interesting developments among short sellers. Back in April, short interest on PFE exploded to the highest point in at least 14 years, with almost 324 million PFE shares controlled by short sellers. However, this huge increase was likely related to the company's failed M&A efforts. Regardless, short interest on PFE now accounts for less than 1% of the stock's total float, with fewer than 44 million shares sold short. 

Meanwhile, the struggling stock is vulnerable to downgrades from analysts. In fact, the majority of brokerage firms rate the shares a "strong buy," and none consider them a "sell." However, as alluded to, sentiment could be shifting, with Jefferies downgrading PFE to "hold" from "buy," and setting its price target at $36.  

Taking a closer look at Pfizer Inc.'s (NYSE:PFE) chart, today's pullback has the shares set to close below their 200-day moving average for the first time since mid-April. The breach of this technical level now puts PFE's year-to-date breakeven point in focus, as it sits just below at $32.28. 

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