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October 2, 2012  Tue 9:50 AM CT

PFE: SEE CHART GET CHAIN FIND STRATEGIES
As Pfizer climbs to another five-year high this morning, one trader is looking for the pharmaceutical giant to spike either higher or lower.

PFE is up 0.8 percent to $25.23, its highest level since September 2007. Shares were down at $17.05 a year ago.

The big trade of the day is a block of 20,000 December 25 puts, which appear to have been bought for $0.65 on a wide bid/ask spread, according to optionMONSTER's systems. The volume dwarfed open interest of a mere 703 contracts in the strike at the start of the session, so this is a new position.

Two minutes later, the largest block of stock traded in a single print of 925,000 shares that went for $25.3849. Together, the stock and options seem to have been combined for a long-volatility play.

The implied volatility of the options 15.8 percent, while the 30-day historical volatility is near 52-week lows at 11.5 percent. So the bet is that volatility will pick up in coming months. (See our Education section)
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In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

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