Monday, December 12, 2011

Trade of the Day: Pfizer March $21/$23 call spreads

The Trade:
A trader sold 10,000 March $19 puts to buy 10,000 March $21/$23 call spreads.

A trader sold the March $19 puts at $0.64 and bought the March $21/$23 call spreads at $0.52. Therefore, he collected $0.12 to execute the trade. Another trader bought 7,000 January $20/$22.50 call spreads at $0.79. Pfizer has been strong lately, trading at 8.9X forward earnings, 11.8X cash flow and 2.3X sales with a 3.9% yield. Pfizer's dividend is being raised to 10%. PFE closed trading today at $20.40. The lower break even price for the spread is $18.88. The white line in the daily stock chart is the maximum profit level, $23.

*Special thanks to Option Radar, BMO Capital, MEB Options, Bloomberg, Reuters, Optionistics, LiveVolPro, CBOE, AMEX, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow!

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

1 comment:

  1. Hello Friend,
    This site is very nice ! Thanks to share with us. As the spread approaches expiration it will start to trade at parity. If you bought a spread that is now way out of the money, you’ll be able to figure out the prices. The profit comes from the difference in the premiums of the two calls. If the price moves up, the calls will both go into profit, and if the price moves down, both calls will expire worthless.