Options Bearish on Merck

By Chris.McKhann

Shares of Merck are trying to claw back some of the losses from last Thursday, but the options trading is decidedly bearish.

MRK is up 0.78 percent to $27.22 in late morning trading. It hit a four-month high last Tuesday above $28 before pulling back at the end of the week. The pharmaceutical company's stock price is now butting back up against its 200-day moving average.

The options trading is heavy in the October contracts on the put side. There are several different bearish put spreads being put on, the first one buying the October 26 puts and selling the October 24 puts more than 11,000 times. The next spread involved buying the October 26 and selling the October 21 puts. These are bearish spreads that will take a maximum profit if MRK is below $24 in the first instance and below $21 in the second.

These levels are not that far away, given the recent volatility. MRK was down near $26 in the middle of June but was only below $21 at the very low on March 9.

(Chart courtesy of tradeMONSTER)