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Saturday, May 25, 2024

Pfizer Options Active Ahead Of Earnings


Today’s tickers: PFE, ODP & MRX

PFE – Pfizer Inc. – Signs of bearish sentiment on the drug maker cropped up in Pfizer options on Monday, one day prior to the Company’s fourth-quarter earnings release ahead of the opening bell on Tuesday morning. Pfizer’s shares are down 0.40% to stand at $21.39 as of 11:50 a.m. in New York. In-the-money call selling in the weekly options may mean some traders anticipate a pullback below $21.00 in the price of the underlying by expiration. Traders sold more than 2,500 calls at the Feb. ’03 $21 strike to pocket an average premium of $0.44 apiece. Call sellers walk away with the full amount of premium in hand as long as shares in Pfizer settle below $21.00 at the end of the week. Call selling can be risky, particularly if sellers are naked short the call options and shares in Pfizer rally rather than retreat as the strategy predicts. Losses accumulate on the upside above an effective breakeven share price of $21.44. Meanwhile, a longer-term bearish play popped up in the April expiry. One investor purchased a 2,000-lot April $19/$22 put spread at a net premium of $1.09 per contract. The strategist may be outright bearish on Pfizer, positioning for a limited pullback in the shares over the next several months. Alternatively, the trader may be cautiously optimistic on the pharmaceuticals giant, establishing the put spread to hedge a long position in the underlying shares. Profits, or downside protection, on the spread kick in if shares in Pfizer drop 2.2% to breach the effective breakeven price of $20.91 by April expiration. Maximum potential profits of $1.91 per contract are available to the investor should shares in PFE plunge 11.2% to settle at or below $19.00.

ODP – Office Depot, Inc. – Shares in the Boca Raton, Florida-based office supplies retailer fell 3.05% to $2.85 today, slipping in sympathy with rival Staples Inc. after analysts at Goldman Sachs cut their rating on Staples to ‘sell’ from ‘neutral’. One options player appears to be betting that Office Depot’s shares, which have rallied more than 32.0% since the start of 2012, will extend gains through February expiration. It looks like the trader snapped up 2,650 calls at the Feb. $3.0 strike at a premium of $0.15 per contract. The call buyer stands prepared to profit at expiration next month should shares in Office Depot surge 10.5% to surpass the average breakeven point on the upside at $3.15. The stock last traded above $3.15 back in August 2011. Despite posting double-digit gains in the month of January, ODP shares continue to trade at a more than 53.0% discount to their 2011-high of $6.18. The retailer is scheduled to report fourth-quarter earnings ahead of the open on February 28.

MRX – Medicis Pharmaceuticals Corp. – Options activity on Medicis Pharmaceuticals this morning suggests at least one strategist may be positioning for shares to rally sharply during the next couple of months. Call buying in the March expiry on the maker of specialty pharmaceutical products for the treatment of dermatological and aesthetic conditions could pay off at expiration if shares in MRX jump following the Company’s fourth-quarter earnings release on February 24. The stock currently trades 0.20% lower on the session at $32.13 as of 12:50 p.m. Activity in MRX options is heaviest at the Mar. $35 strike, where more than 2,200 calls changed hands against open interest of 87 contracts. It looks like the majority of these contracts were purchased for an average premium of $0.74 apiece. Investors long the calls profit at expiration if shares in Medicis surge 11.2% to exceed the average breakeven price of $35.74. Medicis was rated new ‘Hold’ with a 12-month target share price of $34.00 at Cantor Fitzgerald last week.


Caitlin Duffy

Equity Options Analyst

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