Johnson & Johnson has made a big move, but one investor
apparently thinks that it will go back to sleep.
optionMONSTER's tracking systems detected the sale of about 12,500
contracts each in the March 65 puts for $3.09 and the March 67.50
calls for $2.06. There was barely any open interest in either
strike before the trade occurred.
The strategy generated a credit of $5.15, which will be the maximum
profit if the slow-moving drug maker is between $65 and $67.50 at
expiration. Gains will erode outside that range, turning to losses
below $59.85 and above $72.65.
Known as a
, yesterday's option trade is an example of a
strategy that makes money from the
passage of time
rather than a directional move. (See our
JNJ slipped 0.12 percent yesterday to close at $66.42. Management
raised guidance earlier this month, driving shares higher by 8
percent in a little more than a week. That was an exceptionally
large rally for a stock that's spent most of the last year trapped
between $61 and $67.
The next scheduled event that could serve as a potential catalyst
for the stock is the release of second-quarter earnings before the
bell on July 17.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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