Weekend Trader Series
September 25, 2022
Open Positions Update
There are no portfolio updates this week.The following is this week's recommendation:
Merck (MRK)Place a limit order to buy the Merck (MRK) November 18, 2022 75-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, September 23, this option was offered at $13.35. MRK closed at $86.78 on Friday, September 23.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Monday, October 24, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Blue-chip drugmaker Merck (MRK) recently pulled back to its 12-month moving average, an area that coincides with the stock’s 2019 monthly closing high and a 10-year rolling 100% return. On Thursday and Friday of last week, the shares closed above a trendline connecting lower highs since August. With a Sept. 21 bullish divergence forming from its 14-Day Relative Strength Index (RSI), MRK looks primed for a bounce.
Merck stock's latest weekly low near the 85-strike is the site of peak put open interest for options expiring through October, as well as the site of the stock's June closing low.
MRK has frequently exceeded option traders' volatility expectations over the last 12 months. This is per the the stock’s Schaeffer's Volatility Scorecard (SVS) of 97 out of 100. Our recommended November 75 call has a leverage ratio of 5.66, and will double in value on a 17.2% pop in the underlying shares.
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