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OIB Trade Alert: C, PFE

Our Citigroup (C) and Pfizer (PFE) puts are deep in the money following the market’s sharp pullback over the past two weeks.

PFE rallied on Thursday following news the Food and Drug Administration granted emergency use authorization (EUA) for omicron booster shots from Pfizer and Moderna (MRNA), which target the most common COVID-19 strains. This was followed by an endorsement for the boosters from the Centers for Disease Control and Prevention, which said a winter surge could be mitigated if enough Americans get vaccinated.

Pfizer said it will deliver 3 million doses of its booster to vaccination sites around the country by early next week.

I continue to believe Wall Street is underestimating Pfizer. The company expects to generate $54 billion in revenue from its COVID-19 vaccine and treatments alone. And management could revise this higher given the FDA’s EUA for its booster.

I am recommending we accept shares of PFE, and we will sell a call against them soon to generate income and reduce our cost basis on the position. The hope is to capture potential appreciation in addition to income if the market reverses higher.

We are also accepting shares of Citigroup, which have declined steadily since mid-August. While our cost basis will be well above the current share price after factoring in our net debit, this is not the kind of stock you should worry about owning for the long haul.

The multinational investment bank continues to execute on its turnaround plan and is one of the few banks that posted better-than-expected second-quarter results. We will be targeting a mix of income and capital appreciation when selling calls on this core stock.

C Sep Week One (9/2) 52 Put

Current Stock Price: $49.26

Net Debit: $14

Action: Accept shares

Cost Basis: $66

Potential Rate of Return: I am targeting breakeven for this position

PFE Sep Week One (9/2) 50 Put

Current Stock Price: $46.56

Net Debit: $6.59

Action: Accept shares

Cost Basis: $56.59

Potential Rate of Return: I am targeting breakeven for this position

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