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Minyan Mailbag: Full Court With Dr. J


  • Action in the drug sector has been redhot, with Lilly (LLY) moving big yesterday ahead of the ruling on Zyprexa and today LLY is again active, but the real story is the HUGE institutional action in Pfizer (PFE). I show over 69,000 calls being actively purchased, while just 22,000 puts have changed hands. That's a 3:1 ratio in favor of the calls, but my calculation of the dollar value of those calls versus the dollars spent per put are over 5:1. Of particular note are 14,000 of the PFE April 25 calls have traded and 30,000 of the at-the-money April 27.50 calls. The story is of course that a posititve ruling for LLY is great news for those in the sector that have similar proprietary treatments for diseases as this would set a new precedent.

  • Other Drug Stocks To Watch: Merck (MRK), Lilly (LLY), Sanofi Aventis (SNY) and Astrazeneca (AZN).

  • You want some mind-numbing volume numbers? Look no further than Apple (AAPL) where 155,000 calls are changing hands against 134,000 puts. I show 36,000 of the April 40 calls being crushed from $2.45 last night to just one thin dime today! Conversely, 30,000 of the April 40 put buyers are happy campers, as those puts moved up in value as AAPL fell. I'm showing the April 40 puts trading up $.85 to $2.20.

  • General Motors (GM) has been crushed by news that the automaker will hand over docs to regulators relating to an ongoing investigation into Delphi's accounting. GM is off session lows at mid-day, but still down 5% and its expiring April 27.50 puts, now fairly deep in-the-money, are up $.85 to $1.05 on turnover of 6,000 contracts.

  • Lastly, the action in the S&P 500 options (SPX) has been very nervous. While it is common to see the puts trade twice as actively in the index options, I'm showing 57,000 calls trading against 191,000 puts and dollar-weighted numbers also at over 3:1 tells me there is FEAR in the SPX. Please keep in mind that the expiring April options trade for the final time today, as they close on the opening price of that index tomorrow morning and this factors into today's activity.

At the time of publication, Mr. Najarian had positions in SNY, AZN, MRK & PFE.

No positions in stocks mentioned.

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