9500 MRK Jan 52.5 calls were bought for 1.64 & simultaneously 9500 MRK Feb 52.5 calls sold at 2.16.
Earlier today Merck and Co (MRK) was trading 53.55. MRK has an IV30 of 18.17 and a 10 day HV of 26%. The open interest on MRK is 527,000 contract with an ADV of 19,000.? Today, a customer that was short the Jan 52.5 calls closed and rolled them back to February.? The customer bought 9500 of the Jan 52.5 calls for 1.64 and sold 9500 of the Feb 52.5 calls at 2.16.
This is likely a customer that is long the stock and was using the Jan 52.5 calls to create income against his or her position.? With MRK trading higher by a dollar, it?s possible that with the dividend coming up the customer feared that the stock might get called away at in the Jan contract (although it likely would not).? In February there is certainly enough premium to ensure that won?t happen.
This trade should be considered bearish volatility and neutral the underlying.