Pfizer and Lilly Calls Leading Busy Session

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Pfizer

(PFE) - Get Report

and

Eli Lilly

(LLY) - Get Report

. Lilly and Pfizer. The pair are the talk of options desks this morning as both of the Big Pharmas are celebrating the emergence of powerful, popular new drugs that will define them into the next century.

Lilly's breast cancer drug, Evista, and Pfizer's ubiquitous anti-impotence treatment, Viagra, have investors piling their money into the two companies. Almost all the action in the options market has been unabashedly bullish, as new strike prices have been added on both strings today.

"We've been hopping all morning," said Kevin Murphy, from the options desk of

Salomon Smith Barney

, adding that much of the day's activity has been focused on the drug giants. "Pfizer and Lilly are exploding." The busy day comes on the heels of an expiration-day session Friday that saw the

American Stock Exchange

, the nation's second largest options exchange, break its single-day volume record.

The two Big Pharmas are exploding in terms of share price

and

options volume. Pfizer, up 7 3/8 to 112 9/16, has seen traders shooting for several of its call options. The May 115 calls traded more than 1,750 contracts, and the May 120s hit the 750-contract mark. In- and at-the-money call action was heavier, with the May 105 and May 110 calls volume reaching a combined 7,000 contracts with an even split between the two.

Lilly, which is benefiting from front-page

Wall Street Journal

exposure that its osteoporosis drug may have the power to battle breast cancer as well, rose 3 13/16 to 72 1/8 by midday. The options were strong, especially at the May 70 level, where more than 6,700 calls traded compared with open interest of 4,205.

* * * * *

In other options news:

After three weeks on essentially nonstop takeover chatter, it seems like the first trading day of the May expiration cycle is bringing a healthy injection of caution to

Merrill Lynch

(MER)

options.

Granted, caution wouldn't have benefited any traders during the stock's 12% jump since March 31, when it began a race from $83-a-share. Carried along by rumors of a

Chase

takeover and the

Citibank

-

Travelers

deals, the stock climbed to over 94 at Friday's close. But the mother of all securities firms is having a slothful morning, prompting at least one bid to cover the gains of last month.

With Merrill's shares down 1 7/16 to 93 3/8 this morning, almost 1,500 of its May 90 puts traded, with the price rising 1/8 ($12.50) to 3 ($300).

The after-the-close first-quarter earnings announcement of

IBM

(IBM) - Get Report

also is contributing to the strong volume day in the options markets. The stock's strength -- it was up to 110 3/16, a rise of 2 7/16 today -- was mirrored in the options markets, where its out-of-the-money calls were busy. The May 110 calls, posted volume of 4,600 and the May 115 calls hit the 4,300 mark.