Blue-chip drug stock could continue to outpace the broader market

MRK’s options booths are teeming with put traders

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Top notch pharmaceutical action Merck & Co., Inc. (NYSE: MRK) has strongly outperformed the broader market, gaining nearly 22% year-to-date. Stocks broke out in 2022 from a major three-year consolidation zone, which was capped by the $200 billion market cap level. With that level now breached, there is enough pessimism surrounding Merck stocks that could ease and fuel a sustained push higher.

For starters, half of the 16 coverage analysts sport lukewarm “holding” ratings, indicating that a round of overdue upgrades could boost MRK.

Additionally, Merck’s stock options pits are teeming with put options traders. At ISE/CBOE/PHLX, MRK sports a 10-day put/call volume ratio of 1.06 which is in the 97th annual percentile. Echoing this, MRK Schaeffer’s put/call volume ratio (SOIR) of 0.95 also ranks in the highest percentile of the last 12 months. In other words, short-term options traders are much more biased towards Merck stocks than usual at the moment.

Tony Venosa, CMT, is senior options strategist at Schaeffer’s Investment Research. He has over 20 years of trading experience under his belt, including a mid-90s stint in the S&P 500 trading pits in Chicago, as well as time as a commodity broker and day proprietary trader. A graduate of the University of Miami with a BS in finance and decision science, Venosa earned his Certified Market Technician designation in 2008 and has been part of Schaeffer’s in-house research team since 2010.

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