4 Call Option Contenders: Pharmaceuticals

Each week I use my Power Stocks scanner to find the best stocks for options trading. The ones that caught my attention this week had all of the qualities I look for in a call option—the potential for a big move up (volatility) based on technicals and past activity in the stock, and good liquidity. All of these are names you’ll recognize, and for good reason—options which do not have liquidity may trap you into a position, or prevent you from taking a large enough position to make the transaction worthwhile.

The following pharmaceutical stocks have those qualities I look for. I’ll leave it up to you to decide which strike price and month are appropriate for your trading style, but be sure to give yourself enough time to be right. I’ve also included the support levels my scanner has detected for these stocks.

  • Elan Corp. (NYSE:ELN): ELN is trading about a dollar above its support level of $11. According to my computer scan, the stock has above-average volatility.
  • Eli Lilly (NYSE:LLY): LLY is trading about a dollar above $54 support. The stock has above-average volatility.
  • Merck & Co. (NYSE:MRK): MRK has been in an upward trend for over a week, and displays good upside characteristics relative to other stocks. It’s trading about $2 above its $43 support, with average volatility.
  • Pfizer (NYSE:PFE): This stock has confirmed its upward trend after a temporary pullback. Such a bounceback is one of the most reliable signals of a move up. The stock is trading about a dollar above its $27 support.

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