MRK – Merck & Co., Inc. – A flurry of near-term bullish activity on the drug maker caught our eye this afternoon. It looks like some investors are acquiring in- and out-of-the-money call options in the November contract ahead of the impending release of results from an advanced trial of Merck’s drug to fight heart disease by increasing good cholesterol levels. Options traders are prepared to make money if positive results wind up sending Merck’s shares higher next week. Shares in Merck & Co., Inc. are currently flat on the day at $35.05 as of 12:30 pm. Investors itching for a rally picked up more than 5,400 now in-the-money calls at the November $35 strike for an average premium of $0.51 each. Call buyers at this strike profit if MRK’s shares rally 1.3% to surpass the average breakeven price of $35.51 by expiration day in November. Bullish sentiment spread to the higher November $36 strike where some 4,900 calls were coveted at an average premium of $0.18 a-pop. Traders holding these contracts make money if shares surge 3.2% to trade above the average breakeven price of $36.18 ahead of expiration. Finally, call activity at the November $37 strike was motivated by sellers. It appears that the majority of the more than 7,000 calls exchanged at that strike were sold 5,000 times for $0.05 apiece. Open interest is more than sufficient to cover volume today, and the sale of the calls may be a closing position. More than 38,670 option contracts have changed hands on the drug maker as of 12:50 pm.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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