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MERCK
AND
COMPANY
INCORP
 
About The Company

Market Cap 101.8B
Revenue (FYR) $46.0B
EPS (TTM) $.27
Shares Out. 3.1B
Book Value $17.64
Div/Share $1.52
Payout Ratio 546.8x
P/E 120.9x
P/Cash Flow (TTM) 12.2x
Operating Margin 3.59%
Debt To Capital 23.94%
Gross Profit Margin 60%

Merck is a global profitable company in Healthcare and Diversified Pharmaceuticals. It delivers health solutions through medicines, vaccines, biologic therapies, and consumer and animal products, which it markets directly and through its joint ventures. The Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. On November 3, 2009, the Company and Schering-Plough Corporation (Schering-Plough) completed their merger.

 

 

 
 
Should you find my strategy and ongoing evaluation of this trade of value I hope you will consider a tip for the time I spend detailing out this trade. I have set up a Paypal account for those who would like to donate. Thank you in advance. Remember, nothing on my site is financial advice. They are just my ideas and opinions. Investing is risky and losses can be large. Trade at your own risk. Read the terms of use

 

 
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  MERCK AND COMPANY INCORPORATED  (MRK) - 2011
ONGOING EVALUATION & TRADE
With a dividend yield of over 4% (as of Jan 3 2011) this company, based on its earnings, book value and future potential is undervalued. However earnings have not met any expectations and the P/E ratio of 120.9x plus earnings of just .27 cents to date are signs that Merck will need a few years to return to large profits. However this should also assist in selling naked puts as volatility keeps premiums up and the stock is stuck in a range. Both of these are ideal for selling naked puts.
I plan to be in and out of Merck and AT&T, back and forth, throughout the year using the same amount of capital, approximately 70,000. At times I may split the capital between both companies. The ultimate goal is 12% gain against the total capital, so it does not matter which stock performs better.
GOAL: 12% return on the total capital
OBJECTIVE: Selling naked puts and splitting the trade at various times throughout the year between Merck and AT&T.
Should I be assigned shares I will sell covered calls. I am not concerned about owning shares in either Merck or AT&T.
MERCK TRADES BY YEARS
VIEW MERCK 2011 TRADES
ALL
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RETIREMENT PORTFOLIO
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CURRENT U.S.
STOCK PORTFOLIO
INDEX

AT+T
CLOROX
COCA COLA
INTEL CORPORATION
JOHNSON & JOHNSON
KRAFT FOODS
MCDONALDS
MERCK & COMPANY
MICROSOFT
NUCOR CORPORATION
PEPSICO
SPYDER ETF
VISA
EXXON MOBIL
YUM! BRANDS

YEAR 1: 2011 - Trade Commenced Jan 4 2011
Goal for 2011: 12% against the total capital. Trade will at times be split between Merck and AT&T.
 
Capital Currently In Use 0.00
Income Earned in 2011 4579.50
TOTAL INCOME EARNED TO DATE 4579.50
Total Of My Own Capital Required 0.00
Number Of Shares if assigned 0
Share Price Valuation
(Total Capital Required/Number of shares)
0.00

 

 

 

 

YEAR - 1:  2011
TRADE COMMENCED Jan 4 2009
GOAL FOR 2011: 12%

ONGOING STRATEGY - SELLING NAKED PUTS UNTIL ASSIGNED
* ACTIVE TRADES ARE HIGHLIGHTED IN YELLOW

 

Jan 4 2011 35.88 STO 20 Naked Puts Jan 35 @ .28 0.8 0.00   32.00     528.00 528.00
JAN 4 2010: I am starting a new position today in MERCK. I really like this stock. I plan to commit 70,000 into Merck. I like Merck as it is a strong company that has been ignored for most of the past year. My charts below show that it has not recovered to the 2008 highs. The stock is stuck in a trading range. I plan to sell naked puts in large quantities throughout the year at various times whenever the stock reaches the lower bollinger. I am not planning on going very far out. My first naked put foray, is for Jan expiration which is less than 3 weeks away. I am not planning to constantly have naked puts in Merck but will work with the bollinger on this stock for short term trades. Let's look at the past for MRK. The first chart is 3 years showing no real recovery. The second is the past year showing the sideways movement in the stock for most of the year. The third shows my trade today at the lower bollinger.

Jan 6 2011 37.10 BTC Naked Puts Jan 35 @ .07
COMMENTS: 2 Days later and it is worth closing and moving this amount over to AT&T which has a nice pullback today.
(0.20)     32.00     (172.00) 356.00
Jan 19 2011 33.74 STO 21 Naked Puts Feb $32 @ .34 1.0%     33.25     680.75 1036.75

JAN 19 2011: The chart below shows the status. A nice move lower and I am back selling naked puts. The volume is now up to 21 contracts as I have earmarked 70,000 for this trade which works out to 21 contracts at the $32 strike. Merck opened higher than yesterday and could be entering a sideways movement as it bounces along the lower Bollinger. I will close this trade early on an upswing that removes the premium from my $32 put. I do not intend to stay the entire month in Merck. I am hoping AT&T will pullback again allowing me to move from Merck back to AT&T. I like both stocks but I want to use the $70,000 to trade each on weakness. Right now AT&T is back up, so I moved into Merck. I feel pretty comfortable at $32.00 and so for 1% gain I sold Feb $32 strike.

Jan 28 11 33.00 STO 10 Naked Puts Mar $32 @ .74 2.3%     19.50     720.50 1757.25

JAN 28 2011: MRK remains under strong pressure, but the oscillator shows over sold condition and the Volume shows a lack of sellers at this level. This means the so called smart money or institutional holders are not bailing out. Yet the March 32 naked puts are up over 2%. I had to take advantage and I jumped in and sold another 10 naked put contracts. This is why it is so nice to always have some cash available for my trades. I can back up this trade without margin, through my own cash. I believe the Feb 32 naked puts will expire as well.

 

Feb 18 11 32.85 Expiry: 21 Naked Puts Feb 32 expired                

March 16 2011: Merck dropped big today, but at this level below $32.00 I feel it is very undervalued. I sold another 12 naked puts at the April 32 strike. Expiry is in two days for March naked puts. I will be buying to closed my 10 March 32 naked puts and rolling them into April as well.

 

Mar 16 11 31.20 STO 12 Naked Puts Apr 32 @ 1.48 expird 4.6%     22.00     1754.00 3511.25

March 18 2011: A very nice recovery over the past two days.  Today I bought back my puts and sold out to April 32. There is good support at $32 for Merck but if the next set of earnings do not improve, there is a good possibility that Merck could fall to the $30.00 level. This trade I am splitting up between AT&T and Merck, flipping back and forth with the same capital.  Right now though, Merck is the place to be for my naked put trades.

 

Mar 18 11 31.88 BTC 10 Naked Puts Mar 32 @ .20 (0.625%)     19.50     (219.50) 3291.75
Mar 18 11 31.88 STO 10 Naked Puts Apr 32 @ .74 expired 2.3%     19.50     720.50 4012.25

Apr 15 2011: A very nice recovery over the past month.  I have done incredibly well on Merck. At this level though, Merck is too high to consider selling naked puts against. It's the 32 level that was the great spot to sell at. I need the stock to fall back to the lower Bollinger before considering naked puts. Time to look elsewhere for a trade and wait for Merck to come back down. 

Apr 15 11 34.51 Expiry: 22 Naked Puts expired               4012.25
 
Sep 6 11 32.28 Sold 5 Puts Oct $29 @ .50 1.6%     13.25   14513.25 236.75 4249.00
Oct 21 11 33.35 Expiry: 5 Naked Puts Oct $29 expired                
Nov 9 11 33.65 Sold 10 Naked Puts 17DEC11 $30 @ .35 1.1%     19.50   30019.50 330.50 4579.50
Dec 16 11 36.25 Expiry: 10 Naked Puts 17DEC11 $30 expired                
MERCK TRADES BY YEARS
VIEW MERCK 2011 TRADES

 

Disclaimer: There are considerable risks involved in all investment strategies. Trade at your own risk.
Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed or presented are financial advice, trading advice or recommendations. Fullyinformed.com is a private website. Everything presented and discussed are the author's ideas and opinions only.
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