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January 27, 2014  Mon 11:06 AM CT

MRK: SEE CHART GET CHAIN FIND STRATEGIES
Merck is fighting today's market downtrend, but call selling sees limited upside in the pharmaceutical giant.

optionMONSTER systems show that a trader sold 11,500 March 55 calls for the bid price of $0.90. This is clearly a new position, as open interest in the strike was just 1,404 contracts before the trade appeared.

Almost exactly a minute later, a print 414,000 MRK shares was bought for $53.5278. Combined with the short calls, this creates a delta-neutral play that is betting on lower volatility than that implied by the options' premiums in coming weeks. (See our Education section)

MRK is up 2.43 percent to $53.24 in midday trading after hitting a new 52-week intraday high of $54.10 this morning. The drug developer was below $48 a month ago. 
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Education & Strategy

The Strike-Based Greeks

The other Greeks (Gamma, Vega, and Theta) are calculated by using month and strike data, and not by individual option. These are called strike-based Greeks. Gamma, Theta, and Vega are all strike-based Greeks

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