Pharmaceutical giant Pfizer (PFE) has traded weakly in the past year, with shares down 7%. One trader sees further downside over the coming weeks.
That’s based on the February 21 $24.50 puts. With 25 days until expiration, 38,679 contracts traded compared to a prior open interest of 194, for a massive 199-fold increase in volume on the trade. The buyer of the puts paid $0.24 to make the bearish bet.
Pfizer shares recently traded close to $26.50, so the stock would need to decline by about $2, or 7.5%, for the option to move in-the-money.
The strike price is right at Pfizer’s 52-week low of $24.48, and the company next reports earnings on February 4, which could cause a big move in shares.
Like many drug manufacturers, Pfizer has struggled in the post-pandemic era, as several major sources of revenue have shifted.
Action to take: Pfizer trades at 35 times earnings and shares are in a downtrend, so investors may want to shy away from the stock for now. If Pfizer can report a new drug breakthrough or otherwise improve its performance, shares may be a buy again.
For now, traders may want to jump in on the February 21 $24.50 puts. The option is inexpensive enough to see high-double-digit gains or even triple-digit returns, especially if shares take a hit on their next earnings report.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.