Now looks like an ideal time initiate a long position on Merck stock
Merck & Co., Inc.'s (NYSE:MRK) recent breakout above the $88 level took out both its 2021 and 2000 highs. Outperforming with 22.1% year-over-year and 21.6% year-to-date gains, MRK also provides a decent valuation with a forward price-earnings ratio of 12.
There is still room for upgrades, too, with eight of the 16 analysts in coverage carrying a lukewarm "hold" rating. And while short interest is low, it's worth noting that it's risen 37.5% over the past month.
A shift of sentiment in the options pits could provide tailwinds as well. MRK's Schaeffer's put/call volume ratio (SOIR) of 0.78 ranks higher than 99% of readings from the past year. Echoing this, the equity's 10-day put/call volume ratio of 0.94 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 98% of readings from the past 12 months, showing puts being picked up at much faster-than-usual pace.
Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) sits at a high 99 out of 100, meaning MRK has exceeded option traders' volatility expectations during the past year. Lastly, our recommended call has a leverage ratio of 7.6 and will double in a 12.6% pop in the underlying equity.
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