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Pfizer's 14+% Rally This Week Weakens Case for Put Options

$Pfizer(PFE)$  's 14.5% share price rally so far this week is weakening the case for put options that give their holders the right to sell the stock as the drugmaker's outlook improves. 

The stock jumped 6.8% Wednesday, on course for its biggest weekly advance in almost four years, after the company agreed to participate in TrumpRx.gov, a direct-to-customer purchasing platform, which will offer an average of 50% discount on some of its medicines. 

Under the agreement with the Trump administration, Pfizer said yesterday that the company won’t have to face tariffs, as it invests in manufacturing in the U.S. The drugmaker earmarked $70 billion for research, development and capital projects over the next few years, adding to the $83 billion it spent in biotech innovation from 2018 through 2024, it said in a press release. 

That news came days after the company announced an agreement to buy $Metsera (MTSR.US)$, a clinical-stage biopharmaceutical company accelerating the next generation of medicines for obesity and cardiometabolic diseases.

"We think this voluntary agreement fits well with our current forecast, with most of the long-term policy pressure coming from rising tax rates as more of the firm's manufacturing moves to the U.S.,” Morningstar analyst Karen Andersen, who has a buy rating on the stock, said in a note to clients Wednesday. “We think this announcement could allow Pfizer—and investors—to refocus on pipeline advancement, and we point to Metsera and Seagen as two key acquisitions that could result in long-term growth opportunities for this undervalued firm.”

A total of 858,540 call options that give their holder the right to buy Pfizer shares at a specified strike price changed hands Wednesday, more than 7X the 20-day average volume. Put options, which give their holders the right to sell the stock saw volume of about 149,960 contracts. While that's up from a 20-day average of 49,486, the put-call ratio fell to 0.17, the lowest since July.

Pfizer's total options volume reached 1.01 million, landing it in fourth slot for the most active stock options, behind $Tesla (TSLA.US)$'s 2.48 million contracts, $NVIDIA (NVDA.US)$'s 2.47 million and $Intel (INTC.US)$'s 1.17 million.

Call options that give their holder the right to buy the stock at $26.50 in two days attracted the heaviest trading activity, with volume jumping five-fold to 40,110, 10X open interest as the stock price climb above that strike price, putting the contract well in the money. 

CFRA analyst Sel Hardy raised her price target on the stock to $30, from $28, as she viewed the grace period that Pfizer got from pharmaceutical tariffs by the Trump administration as "positive."

She now expects the company's 20226 earnings rising to $3.21 per share, from a previous outlook of $3.06. 

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