Drug manufacturer Pfizer (PFE) has struggled in the past year, with shares shedding nearly 25%. One trader sees a further decline in the coming weeks.
That’s based on the July 5 $28 puts. With 28 days until expiration, 18,025 contracts traded compared to a prior open interest of 165, for a massive 109-fold increase in volume on the trade. The buyer of the calls paid $0.21 to make the bearish bet.
Pfizer shares recently traded for about $29.50. They would need to decline $1.50, or about 5%, for the option to move in-the-money. Such a move in a short period of time is possible for shares, having rallied that much higher in the past week.
While Pfizer has struggled in the past year, shares have been trending higher since late April. Operationally, Pfizer has been a wreck, with revenues down 20% and earnings off 44% in the past month.
Action to take: While Pfizer looks attractive and pays a 5.7% dividend at current prices, there could be some short-term downside in the coming weeks. Interested investors may get an opportunity to buy shares on a pullback in the coming weeks.
For traders, the July 5 $28 puts are somewhat aggressive, but are also inexpensive enough to provide investors with high-double-digit returns or better in the span of a few weeks. Traders should look to take quick profits on a down day for shares.
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 company mentioned in this article.