OptionsHouse

Options Trading News

January 13, 2014  Mon 11:53 AM CT

MRK: SEE CHART GET CHAIN FIND STRATEGIES
Merck is exploding higher today, and the bulls think that it still has room to run in the near term.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 3,000 January 52.50 calls for $0.46. A similar number of January 50 calls was sold at the same time for $1.57 against previous open interest, which suggests that an existing long position was closed and rolled to the higher strike.

Long calls lock in the price where a stock can be purchased, letting investors cheaply control a move higher. Capital can also be transferred from one contract to another as shares climb, freeing up cash along the way while preserving the upside exposure. Today's transaction recovered $1.11. (See our Education section)

MRK is up 5.95 percent to $52.85 in afternoon trading after positive clinical trial data for its vorapaxar anti-clotting compound was posted on the Food and Drug Administration's website. The treatment goes before an advisory committee for review later this week.

The stock is back to its highest level since early 2008. Other health-care and pharmaceutical names including Xoma and Mast Therapeutic have also seen bullish activity today.

Overall option volume is 6 times greater than average in MRK so far today, according to the Heat Seeker. Calls account for almost three-quarters of the total.
Share this article with your friends


OptionsHouse

Premium Services

Archived Webinar

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »