Sold Pfizer cash secured puts options

Pfizer (PFE) is making new lows. I sold PFE puts on this high dividend stock because I want to add shares at a nice discount.

By Donald E. L. Johnson

Cautious Speculator

• Pfizer is making new 52-week lows on concerns about President Biden’s proposed price controls, a looming recession, rising interest rates and the bear market.

• Pfizer is a dividend stock, yielding 4.2%.

• Selling way out of the money (OTM) puts is a way to put cash to work until the markets settle at new price levels.

Pfizer (PFE) is trading at new lows and it is likely to go lower, especially if tomorrow’s job report is bearish for stocks.

I sold PFE 3.31.23 (22 days) $36 strike (delta -9, OTM probability 88.47%) for $0.13 a share. If assigned, I’ll buy PFE at an 8.9% discount from the $39.52 price at the time the trade was filled.

The annual return on risk (ARoR) on this trade if I do trades at the same prices and RoR 17 times in the next 12 months would be about 5.5%. At the moment, the puts are $0.14 bid and $0.18 ask, which means the mark is at $0.16 per share. There are 100 shares in a puts option contract.

The annual dividend yield on the $35.87 net debit would be about 4.63%. If the puts are assigned, I’ll sell covered calls to generate extra options premiums income.

On Barchart.com, PFE gets a 100% sell rating. At some point that will change. I own PFE and am adding shares because it is part of my high dividend stocks portfolio. I sold puts on some other dividend stocks a few days ago.

Drug stocks are being hit by President Biden’s announced plans to impose price controls on prescription drugs. Politicians have been trying to do that for years. The GOP House won’t go along with that, but he may try to use powers given to the Sec. of Health and Human Services to apply the controls to a few drugs.

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Beware. Like all investing, trading stocks and options is risky. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content nor for any links.