$MRK Options Intelligence

# MRK Options Trade Analysis – November 12, 2025

🎯 SELL MRK NOV 21 95/100 CALL SPREAD

I recommend this credit spread because the term structure reveals a critical premium-selling opportunity: the 7-day Clean IV at 27.3% sits 3.6% below the 28.9% baseline volatility, yet the market is pricing in elevated event risk around the upcoming CPI report (tomorrow) and Fed decision (Dec 10). This creates a mismatch—you're selling overpriced short-term premium while the stock consolidates after its 8.5% rally on enlicitide Phase 3 data. Combined with RSI at 67 (neutral-to-overbought) and price 5.3% above the 20-day MA, mean reversion is likely within this 9-day window.

Sell MRK Nov 21 95/100 Call Spread
Stock Price: $91.13 | Entry: $0.35 credit

📊 Trade Metrics

• Risk: $465 (width of spread minus credit received)
• Reward: $35 (credit collected)
• Breakeven: $100.35
• Max Loss: $465 if MRK > $100 at expiry
• Max Profit: $35 if MRK < $95 at expiry
• Win Rate: 78% (based on delta: short 95 call delta 0.175, long 100 call delta 0.039)
• Days to Expiration: 9

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 28.9%
• 7-day Clean IV: 26.0% (2.9% below baseline = SELL signal, but marginal)
• Market IV: 27.3% (elevated for near-term)
• Current IV Rank: 100% (maximum - strong sell premium bias)
• Calendar Opportunity: Yes - significant IV drop from 7d (27.3%) to 47d (24.7%) shows 2.6% differential
• Primary Edge: You're collecting premium into tomorrow's CPI print and next week's Fed decision, then exiting before longer-dated IV compression

The elevated IV Rank of 100% is the dominant signal here—this is the highest IV environment possible, making credit spreads statistically superior to debit spreads. The market is pricing maximum uncertainty despite the stock's recent strength.

📈 Greeks & Volatility

• Net Delta: +0.136 (slightly bullish bias, but capped)
• Theta: $4.20/day (rapid time decay in final week)
• Vega: -$12 (benefits from IV contraction post-events)
• Current IV: 32.5% (elevated vs 5.0% historical)
• IV Skew: Puts 9.7% higher (unusual—suggests downside hedging demand)
• Put/Call Volume Ratio: 0.04 (extremely bullish—4 calls for every 1 put)
• Unusual Activity: 2025-11-14 93 call shows 2.8x normal volume (6,269 vs 2,213 OI)

🎯 Why This Trade

The term structure combined with extreme IV Rank creates a textbook premium-selling setup. Merck's stock jumped 8.5% on enlicitide Phase 3 data showing 55.8% LDL-C reduction—a genuine catalyst that's already priced in. The stock now sits at $91.13, up 8.5% in two days, with RSI at 67 (neutral zone but trending toward overbought). Price is 5.3% above the 20-day MA ($86.52), suggesting profit-taking is likely.

The IV Rank at 100% is critical: this indicates options are priced at their maximum relative value. The short 95 call (delta 0.175) has only a 17.5% probability of being ITM, while the long 100 call (delta 0.039) provides defined risk. Your breakeven at $100.35 is 10% above current price—well above the expected daily move of ±1.87 (2.05%).

Tomorrow's CPI report and next week's Fed decision will likely compress IV significantly once the uncertainty resolves. This spread captures that compression while limiting upside risk to just $465. The put/call volume ratio of 0.04 shows institutional call buying (bullish), but the unusual 93 call volume suggests profit-taking is already beginning.

📊 Pro Analysis

• IV Rank: 100% (maximum - SELL premium NOW)
• Expected Daily Move: ±$1.87 (2.05%) - well below $5 spread width
• Put/Call Volume Ratio: 0.04 (bullish, but call buying may be exhausted)
• Market Maker Max Pain: $100 (exactly your long strike!)
• Technical: RSI 67 (neutral), Price +5.3% above 20MA (pullback likely)
• Earnings: Feb 3, 2026 (83 days away - no earnings risk in this 9-day window)

🔍 Earnings Date Check

Earnings: February 3, 2026 | Recommended Expiration: November 21, 2025 | Validation: ✅ Expires 75 days BEFORE earnings - This is intentional. You're capturing short-term premium decay and event-driven IV crush from CPI/Fed, with zero earnings risk. If you wanted earnings exposure, you'd use 2026-02-20 or later.

💡 Trade Management

• Entry: Place limit order at $0.35 credit (bid $0.35, ask $0.40)
• Target: Close at $0.15 (57% profit) by Nov 18
• Stop: Exit if MRK closes above $97 (threatens profitability)
• Time Stop: Close by Nov 19 (2 days before expiration, capture 80% of theta)
• Monitor: Watch CPI print tomorrow—if inflation cooler than expected, IV compresses faster

📅 Economic Events This Week

• CPI Report: Tomorrow (Nov 13) - Core inflation data could trigger 2-3% IV swing
• Non-Farm Payrol