Someone’s Riding This High-Flying Pharma


Someone’s turning time into money as America’s No. 2 drug stock levitates into the ether.

Pfizer (PFE) rose 1.13 percent to $43.75 yesterday, its highest close since December 2001. It’s been riding a wave of strong earnings and a stealth influx of capital into the forgotten healthcare space.

An options trader played PFE’s move by selling 13,000 December 44 calls for $1.13. He or she also bought 13,000 December 43 calls for $1.72, but volume was below open interest. That suggests a covered-call position was closed and rolled to the higher strike.

The strategy lets investors collect premium against a holding in the shares — in this case 1.3 million of them. (See our Knowledge Center.)  Adjusting up to the 44s cost $0.59 but will let them collect $1 more on the underlying.

The call roll appears to be part of an ongoing trade first documented on Market Insights over the summer. It pushed total option volume to more than twice the last month’s daily average, according to TradeStation data.

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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.