Big put spread in Johnson & Johnson
Chris McKhann | [email protected]
More than 54,000 JNJ options traded yesterday, 4 times its daily average, led by a put spread out in January 2014 contracts. A trader bought 10,000 of the 70 puts for $6.54 and sold 10,000 of the 55 puts the bid price of $0.99, optionMONSTER's Depth Charge system shows.
This put vertical spread cost the trader $5.55, which is the most that ultimately can be lost. The maximum gain of $9.45 would be realized at expiration if JNJ is back below $55, a level last seen in June 2009.
Given that the put spread is in the money, it seems unlikely this is hedging and more likely a bet that JNJ will see hard times in the next year or so. The trader is using the long-dated options to avoid the increase in implied volatility because of the earnings report.
JNJ closed yesterday up 0.93 percent at $68.60. The pharmaceutical and medical-supply giant is climbing back toward last Monday's levels after losing ground each day last week. The previous Friday marked the highest close for JNJ since September 2008.