Call seller bets on limited upside in J&J
Chris McKhann | firstname.lastname@example.org
JNJ is up 0.5 percent this morning, trading at $69.25. The pharmaceutical and medical-supply giant hit $69.75 on the first day of August, its highest level since September 2008. Shares were down at support and 2012 lows around $62 into the middle of June.
A trader sold 10,000 January 2014 70 calls for the bid price of $3.10, according to optionMONSTER's systems. The volume was just about twice the open interest in the strike at the start of the day, so it is a new position.
The call seller apparently believes that JNJ won't move much higher than $70. The options were likely sold against long stock given that they are so close to being at the money.
As such, the maximum profit would come if shares are at or above the $70 strike price. But the strategy gives up any gains in the stock beyond that level. (See our Education section)
The activity follows an even longer-term bullish trade in the 2015 calls yesterday.