Drug manufacturer Pfizer (PFE) has lost 44 percent over the past year, as the company has struggled in the current market for new drugs. One trader sees the trend continuing in the weeks ahead.
That’s based on the January 5, 2024 $27 put. With 23 days until expiration, 9,076 contracts traded compared to a prior open interest of 209, for a 43-fold rise in volume on the trade. The buyer of the puts paid $0.15 to make the bearish bet.
Pfizer shares recently traded for about $28.60, so shares would need to drop $1.60, or about 5.6 percent, for the option to move in-the-money.
Such a drop is steep for the amount of time left on the option, but given that shares are near their 52-week low of $28.30 and trending lower, the options could still be a winner.
Action to take: Pfizer shares are starting to look like a value play at 9 times forward earnings and with a 5.7 percent dividend. Long-term investors may even want to start buying a position around current prices, provided they wait for the current downtrend to end.
For traders, with shares trending down, shorting is the best play for the moment. And traders can use the January 5, $27 puts for a quick year-end profit on the short side.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.