Rolling Long Exposure in Merck & Co.

During morning trading, options volume in Merck & Co. Inc. (MRK) suggests an investor rolled a long call position in the front-month out to December on a potential bet that the stock could move more.

The investor likely sold to close 11,000 November 34 calls for 30 cents per contract and simultaneously bought to open the same number of December 34 calls for 60 cents. MRK shares were trading down 52 cents to $31.91 at the time of this trade. More than 13,000 of both options have hit the tape, and the November 34 calls are home to current open interest of 14,500 contracts while the December 34 calls are home to open interest of 430 contracts. The investor most likely paid approximately 30 cents for the roll (subtracting the price of the option the investor sold from the price of the put bought gives premium paid). Both calls have seen fractional movement on the day.

Approximately 24,000 options across all strikes trade in drug manufacturer MRK each day, but this investor helped boost options volume beyond 30,000 contracts so far today.

MRK shares have rallied 52% since reaching their March low of $20.99, but the stock saw a new 52-week high of $34.18 at the beginning of last week before the company announced earnings figures on Oct. 22. MRK announced 90 cents earnings per share (EPS) versus analysts’ expectations of 82 cents EPS.

A roll-out such as this is not necessarily bullish or bearish, but it’s interesting that at least one investor is not yet finished with these calls, and rolled them out to a later-dated series.