PFE: Checking the Temperature

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Over the life of Pfizer (PFE), because of its size and slow speed, its volatility has not been particularly high. The stock typically moves between a 10%-15% volatility on an annualized basis, not exactly a mover and a shaker. This typically pushes us toward selling options vs buying options.

If we thought there was some impending drug announcement, it might lead us in a different direction. But, with PFE the story is more thematic. For example, the pipeline is getting stronger, better costs and management, etc. In this case it almost always works to sell premium rather than buying it, even in this type of environment.

Before we get to the options trade, let's take a look at the T3/OP video as Jill reviews the longer-term fundamental view and Scott goes to the charts.



For our options strategy, we are going to sell a put spread in May at about $0.30. The intent is to buy it back for $0.10.

Trades: Sell to open PFE May 22 put at $0.50 and buy to open PFE May 21 puts for $0.22.

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At the time of publication, Jill Malandrino, Mark Sebastian and Scott Redler held no positions in the stocks or issues mentioned.

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