If stocks were humans, the S&P 500’s 9.3% move from 4,950 at 11 a.m. in New York to 5,456.90 at the close was one for the ages.
I was working for a client around 1:30 EST when I looked at the Google Finance quote page. The index was green, but more importantly, it showed an 8%+ gain. My first reaction was it had to be wrong. There was no way it was correct.
A quick news search explained the improbable rally: a 90-day pause in the tariff rollout. Except for China, the White House considerably reduced the temperature of the global economic trade situation.
The 90-day pause lit a fire under investors. I’m skeptical there will be more gains ahead, and the trade situation is anything but settled. Many companies you invest in that trade outside the U.S. still have more questions than answers.
Uncertainty is never good for the upward trajectory of the markets. I won’t buy until things settle down, but that doesn’t mean you shouldn’t.
In Wednesday’s trading, there were 721 unusually active call options--defined as options expiring in seven days or more with Vol/OI ratios of 1.24 or higher--along with 449 puts for a Put/Call Volume Ratio of 0.62, which is a bullish indicator.
Of course, when the S&P 500 gains 9.5% in a single day, you don’t have to be a rocket scientist to know this is the case.
In yesterday’s action, three unusually active long-haul call options stood out.
Pfizer (PFE)
Pfizer’s (PFE) performance in recent years is best described as “disappointing.” With 11 drugs or treatments in its biopharma business generating at least $1 billion in global annual revenue in 2024, you would think its shares would do better than losing a third of their value over the past five years.
That said, compared to a stellar performer such as Eli Lilly (LLY)--it’s gained 417% over the same time--it’s easy to see why only nine of 24 analysts rate it a Buy with a median target price of $29.50.
However, at the same time, it’s hard to ignore the company’s $12.78 billion in levered free cash flow in 2024, the highest non-Covid performance since 2019. Its latest trailing 12-month levered free cash flow is $12.95 billion through March 31, a 20.4% free cash flow margin.
The potential is there. It just has to execute better.
The unusually active call option that stands out for me expires in 982 days (almost 33 months).
The $3.80 ask is 16% of yesterday’s closing price. That’s high, but reversion to the mean suggests it isn’t out of line for the lengthy decay. Excluding the wild period during Covid, PFE stock last traded in the $40s in January 2019. It can get back there.
Slightly ITM (in the money), your breakeven is $25.80 (14.72% appreciation) with over two-and-a-half years to work with.
If, and that’s a big if, Pfizer can get its act together, this could be a good way to buy its stock at a reasonable price using the leverage of the call.
Chevron (CVX)
I’m not an oil and gas investor, but the current administration is high on fossil fuels, so some oil and gas stocks or ETFs make sense for most portfolios.
Chevron (CVX) got back some of its losses from the past week yesterday. As a result, it is back in positive territory in 2025. However, as I write this pre-market, it could return to negative territory in Thursday trading.
It’s down over 10% over the past 12 months, compared to a loss of 13.4% for its Exxon Mobil (XOM) rival. Over five years, it’s been badly outperformed by XOM--145% to 73%.
It’s got something to prove to investors.
Analysts are generally optimistic about Chevron, with 19 rating it a Buy out of 27 (70%, above the S&P 500 average) covering it. The median target price of $175 is 22% higher than its current share price.
The company continues to invest in the Permian basin. A senior executive told Reuters recently that it is rolling out its triple-frac process for fracturing subterranean rock to up to 60% of its wells in 2025, enabling it to increase its output in the basin while reducing the costs associated with getting new wells up and running.
It plans to spend between $4.5 billion and $5 billion in 2025 for its Permian wells—another innovation it is using to lower costs in a challenging price environment.
As oil and gas companies go, it’s generally well run. Its stock deserves better.
The Jan. 15/2027 $180 call is well OTM (out of the money). The $9.75 ask price is just 6.7% of the share price. You're doing well whenever you can pay less than 10% of the share price for a call.
Given analysts believe its share price could get to $175 in 365 days, and you’ve got another 281 (nine months) beyond that to move another $14.75 (8.4%) above that to its $189.75 breakeven, a big move in oil prices would almost certainly get you there.
However, despite my optimism, the profit probability of breaking even is only 23.76%.
Nike (NKE)
When long-time Nike (NKE) executive Elliott Hill was announced as the new CEO of the footwear giant last September, Hill's return was generally hailed as a wise move as the company struggled to regain its groove.
However, investors generally assumed that Hill had his work cut for him because Nike needed fixing in a big way. The Vietnam tariff of 46% that was implemented on April 2 made his job exponentially harder; the 90-day pause should help Hill and Nike figure out what to do with its supply chain to protect its business from future trade shocks.
Nike stock gained over 10% once the news was out about the pause. Unfortunately, it’s given up most of the gains early in Thursday trading. Its shares are down 28% year-to-date, 39% over the past year, and 38% in the past five years. It hasn’t traded this low since October 2017.
Investing in Nike stock takes patience and an ounce of courage. It is not a sure thing with shoe competitors like ON Holding (ONON) taking the fight to it; Hill will have to execute at an incredibly high level to return Nike to its rightful place among iconic global brands.
Of the 721 unusually active call options yesterday, Nike’s March 20/2026 $77.50 strike had the 14th-highest Vol/OI ratio at 22.71.
I like it because it’s just 5.8% of the $59.32 closing price. The last time it traded at $80.95, the call’s breakeven was last September after the announcement of Hill’s hiring. It’s fallen 34% in the seven months since.
Here’s what I see for the same call as I write this.
The good news is that you can get the call for over $100 less than you could at yesterday’s close. The bad news is that it’s further OTM with just a 15.41% probability of profiting from the trade.
At just 4.4% of the share price, aggressive investors who believe in the brand should consider trying to get some of these calls.
Just do it.
