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Tuesday, April 23, 2024

Top Trades for Tue, 09 Mar 2021 09:59 – PFE

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Top Trades for Tue, 09 Mar 2021 09:59 – PFE
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And, of course, keep in mind that China moved quickly to rapidly contain their pandemic so their economy wasn't as destroyed as our was thanks to Trump's denial of the virus and the problems it was causing.  China still hasn't had their 100,000th infection despite hitting 80,000 last June while the US had 50,237 new cases yesterday. 

Globally, 312,051,418 of our 8,000,000,000 people have been vaccinated or, less than that – since that's the number of DOSES that have been administered, not the actual number of people.  That's only about 3% for those of you keeping score (or planning on sending out orgy invitations).  

There's another few Trillion Dollars that have to be spent.  Figure at least $100 x 8Bn people is $800Bn right there and, since it's a Government project, triple that cost at least but it has to be done and it has to be done globally or all we will end up doing is wiping out the easy to kill strains of Corona and leaving the super-strains to fester in other parts of the World until they come back here to infect us again.   No one's even talking about the next stage of the vaccination program because we don't have enough doses for our own orgies yet but it does need to be done – and soon!  

That's why Pfizer (PFE) is still a bargain at $34.35 – the WHOLE WORLD needs to be vaccinated, not just the US.  And we'll probably need to be re-vaccinated next year too.  Yes, JNJ and MRNA are good too but it's PFE that's stupidly cheap at $34.35, which is a market cap of $191.5Bn for a company that made $16Bn in 2019 and $9.6Bn last year and projects $18Bn in earnings this year – and that doesn't even take into account the massive vaccine sales that are still a wild card.  

We already have a play on PFE in our Long-Term Portfolio and, frankly, it's not doing well so far:

PFE Long Call 2023 20-JAN 30.00 CALL [PFE @ $34.35 $-0.04] 50 9/28/2020 (682) $40,000 $8.00 $-1.95 $8.00     $6.05 $0.38 $-9,750 -24.4% $30,250
PFE Short Call 2023 20-JAN 37.00 CALL [PFE @ $34.35 $-0.04] -50 9/28/2020 (682) $-23,000 $4.60 $-1.25     $3.35 $0.37 $6,250 27.2% $-16,750
PFE Short Put 2022 16-SEP 35.00 PUT [PFE @ $34.35 $-0.04] -15 9/28/2020 (556) $-9,900 $6.60 $-0.85     $5.75 $1,275 12.9% $-8,625

We invested net $7,100 in that $35,000 spread and we're down $2,225 but that means, as a new trade, it's only net $4,875 for the $35,000 spead with $31,125 (638%) upside potential if PFE can get back to $37 by 2023 and the worst case is you end up owning 1,500 shares at $35 ($52,500) plust the $4,875 invested comes out to about $38/share but those are only Sepember puts and they are now $5.75 and mostly premium and the 2023 $33 puts are $4.50 so we'd lower our basis by rolling them if we have to.   The margin on the short puts is just $5,379, so it's a very efficient way to make $31,125.  

We have a similar spread in our Money Talk Portfolio and, like the LTP, we're going to leave it alone for now but, in our Dividends Portfolio, we don't have PFE – even though they pay a nice $1.56 (4.54%) dividend – and we know how to enhance that with a simple options strategy.  So, for the Dividend Portfolio, let's add:  

  • Buy 1,000 Shares of PFE for $34.35 ($34,500) 
  • Sell 10 PFE 2023 $30 calls for $6 ($6,000)
  • Sell 10 PFE 2023 $33 puts for $4.50 ($4,500) 

That drops our net entry to $24,000 or just $24 per share.  If we are assigned 1,000 more at $33, our average cost per share would be $28.50, still 17% below the current price.  That makes the $1,560 dividend we expect to collect a very nice 6.5% dividend while we wait to be called away with a $6,000 (25% profit) but, of course, we intend to roll our short puts and calls and keep the stock for the long run.  

It's not very sexy with "just" an anticipated return of $9,120 (38%) against our $24,000 investment in two years but, if PFE is safely over $37 early next year, we can then release the allocation block for another trade.  That's why, even with conservative targets like these, our Dividend Portfolio is up 70.2% since Oct 25, 2019.  As we discussed in last week's Live Trading Webinar, you don't have to swing for the fences to make very nice returns and, if you keep getting hits – some of them are going to be home runs anyway.