Weekly Calls Active On Merck As Shares Climb
Shares in Merck are on the rise on Monday, gaining as much as 4.0% near the open to touch a six-year high of $54.10 after the stock was raised to ?overweight? from ?underweight? with a target price of $60.00 at Morgan Stanley. The sharp rally in the price of the underlying amid the continued selloff in U.S. stocks today sparked heavy trading traffic in weekly call options on the drug maker during the first half of the session.
The most traded weekly calls by volume on MRK are the Jan 31 ?14 $53.5 strike calls, with around 2,700 contracts in play against open interest of 378 contracts. Time and sales data suggests most of the calls were purchased for an average premium of $0.43 each. Call options at successively higher striking prices, including the $54, $54.5 and $55 strikes, traded more than 1,000 times each this morning. Notably, it looks like most of the roughly 1,400 Jan 31 ?14 $55 strike call options that have changed hands so far today were purchased at an average premium of $0.21 per contract. Traders long the $55 calls may profit at expiration if shares in Merck rally another 2.0% over today?s high of $54.10 to exceed the average breakeven price of $55.21 ahead of the weekend.
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