Pharmaceutical manufacturer
Pfizer (PFE) is down 11% over the past year on concerns of a slowing drug pipeline. One trader sees shares continuing that trend lower in the coming weeks.
That’s based on the January 10, 2025 $24 puts. With 31 days until expiration, 22,448 contracts traded compared to a prior open interest of 133, for a 169-fold rise in volume on the trade. The buyer of the puts paid $0.20 to make the bearish bet.
Pfizer shares recently traded for about $25.75, meaning shares would need to decline by about $1.75, or nearly 7%, for the option to move in-the-money. The strike price is also slightly below the 52-week low of $24.48.
Operationally, Pfizer has had a mixed year. Revenues have surged by 33%, but the company’s earnings growth has slowed overall. A pickup in earnings is expected into 2025, with shares trading at less than 9 times forward earnings.
Action to take: In addition to its low PE multiple, Pfizer is one of the highest-yielding common stocks in the market today with a 6.5% dividend yield. Value investors may like shares at this price, or on any drop into the $24 range.
For traders, given Pfizer’s long-term downtrend, the January $24 puts are well positioned. The trade isn’t likely to move in-the-money, but quick traders could likely grab mid-to-high double-digit gains given the low cost of the option.
