OptionsHouse

Options Trading News

October 16, 2012  Tue 2:45 AM CT

JNJ: SEE CHART GET CHAIN FIND STRATEGIES
Johnson & Johnson rose yesterday ahead of this morning's earnings results, but one long-term trader sees the stock eventually going in the other direction.

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.
Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

Continue to melt up? Think debit call spreads

The U.S. equities market is continuing to melt up. Even though the labor market is stagnant, the Fed keeps hinting that a short term interest rate hike is coming sometime soon.

View more education articles »