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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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Timing the Trade

Both break outs and a break downs need to have a couple things happen before it is considered a confirmed break out or break down by technical definition!  The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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